(MSFT) Archives - Page 32 of 76 - Mad Hedge Fund Trader

The Largest Shadow Banker and U.S. Tech

In the top-heavy global media landscape, there seems to be this notion that the U.S. and its capital is the primary alpha male swaying asset prices.

The close to $6 trillion in recent stimulus chasing too few services demonstrably has an outsized vote on the matter of asset pricing.

But the dirty little secret about this stimulus is that U.S. private equity is spilling into Nordic and Western European markets effectively forcing a rapid Americanization of asset prices across the Atlantic.

Shadow banks finance financial transactions that are too risky for banks.

In the US, they already grant half of all loans.

In times of low or even negative interest rates for credit, fewer and fewer investors bring their money to a normal bank, but rather to a so-called shadow bank.

This is a term that has become established to describe a phenomenon for financial participants who are not a bank.

What a shadow bank is is not exactly defined, because there are no shadow banking licenses; but tech companies and the U.S. wielding of this critical function have changed the financial world.

In some cases, a few large private families who now have the means to invest in such funds are also focused on funding through these shadow banks and most of the time to buy American tech stocks.

And they deliberately invest not just in a single fund, but across all countries in the world, and shadow banks make up around a third of the financial sector.

In Germany, it is more than a third and on the EU average, it is almost exactly a third.

Pension funds and pension funds work like small insurance companies: employees of a company pay part of their gross wages directly, free of tax and social security contributions. At the end of their working life, they will then be paid a supplementary pension from the income generated.

The fact that “their” money is mandated to be invested in the global financial markets - at least if people hope to receive a pension after their active working life.

These European pension funds are also turning to U.S. branded shadow banking.

According to the Financial Stability Board, shadow banks had a total of $80 trillion in business in 2021.

Compared to the previous year, this was an increase of 8.5%. The FSB information is based on data from 29 countries. These in turn represent 80% of global economic output.

Many deals and transactions are outsourced from the banks now. That means: The financial business tries to circumvent the regulations and the largest shadow bank is BlackRock (BLK) - involved in 20,000 companies.

Many of these outsourced financial service providers are also nothing more than subsidiaries of BlackRock.

This outsourcing offers their customers the prospect of significantly higher interest rates.

BlackRock is an influential major shareholder in all listed global corporations from Europe and the USA.

Although it was founded in 1988, BlackRock was unknown to most people in Germany for decades.

That only changed in 2018, when the politician and lobbyist Friedrich Merz announced his candidacy for the CDU party chairmanship.

At this point in time, Friedrich Merz had been head of the supervisory board of the German offshoot of BlackRock for two years.

This is a company that currently manages a fortune of over nine trillion dollars which is far more than what is produced in Germany, every year, in terms of goods and services - considerably more.

At BlackRock, they harness the smorgasbord of mechanisms that define this new area of shadow banking: hedge funds, VC, real estate, index funds, and money market funds.

BlackRock holds considerable blocks of shares through various subsidiaries, including in normal commercial banks - such as Bank of America, Citigroup, and Deutsche Bank.

But that’s not all.

BlackRock is by far the largest owner in the German share index - with a share of 15 to 17%.

That means: every sixth share of the 30 largest German corporations is controlled by one of the BlackRock funds.

That BlackRock's ownership structure rotates in circles. The asset management companies control themselves, or are actually not subject to any control.

It’s an almost incestuous system where you pursue your own interests through a network of participation. While banks are systemically relevant, BlackRock is still uncontrolled, and they refuse to classify this company as systemically relevant.

But that is BlackRock and that is part of what made them highly successful.

It is extremely well connected. It has long-standing, important politicians in its ranks. Friedrich Merz is just one example in the big picture.

French President Emmanuel Macron recently said he wanted to see the creation of at least 10 tech companies in Europe worth over 100 billion euros each by 2030.

While Europe is now home to many unicorns — start-ups valued at over $1 billion — it is yet to produce a company with the scale of American and Chinese tech giants.

But I am ready to argue that Europeans no longer have control over their own narrative in their own financial system, it is now U.S. private equity.

Assuming that this holds true, even if President Macron’s wish bears fruit, the owners of these “European” tech companies will of course be Americans who are dressed up as European pension funds and maybe even perhaps somehow a company starting with a B and ending with ROCK?

The oversupply of capital from the U.S. that has overcharged U.S. tech shares will get any piece of the action that Europe creates if they are to create a tech renaissance, which I highly doubt.

And the real truth is that any unicorn created in Europe will most likely go public in New York anyway.

The pandemic has also supercharged the influence of Blackrock in Germany and Europe as a whole and that cannot be diminished.

According to Blackrock’s 13F, 10% of their portfolio is Apple (AAPL), Microsoft (MSFT), and Amazon (AMZN) - holding $128 billion in AAPL, $123 billion in MSFT, and only $87 billion in AMZN.

Their largest 7 holdings are in U.S. tech stocks.

This is just a 13F in their main fund, and it wouldn’t be shocking to find out some of their European subsidiaries are also doing the same thing even if not with the same amount of capital.

The European financial system has effectively been gamed by Blackrock and its copycats, so next time you hear of a large Nordic or German equity fund making a big splash in U.S. tech shares, the eventual originator of that decision could be Blackrock.

This is the type of sophistication we are dealing with at this point in global markets and essentially nothing beats the eye test anymore because we have no idea what is happening unless we follow the trail of money.

July 19, 2021

Diary, Newsletter, Summary

Global Market Comments
July 19, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE DELTA CORRECTION IS HERE)
(AMZN), (AAPL), (FB), (MSFT), (TAN), (FSLR)

The Market Outlook for the Week Ahead, or The Delta Correction is Here

Diary, Newsletter

Right now, the fate of your investment portfolio, and indeed your life, is in the hands of a minority of anti vaxers in the Midwest.

If the surge in the delta variant burns out in weeks or a month, the current market correction won’t extend any more than 5% and you should be loading the boat with big tech stocks like (AMZN), (AAPL), (FB), and (MSFT).

The delta variant is becoming a big deal, with unvaccinated states like Arkansas (35% vaccination rate) and Missouri (40% rate) driving the resurgence. It is essentially an epidemic of the unvaccinated.

Unless checked, it could lead to a broader stock market selloff in August. Los Angeles brought back the indoor mask mandate on Saturday, although compliance is near zero. San Francisco may be close behind.

Everyone in my company worldwide is now vaccinated, with Australia last to get one. I’ll be first in line for the Pfizer booster out in the fall. Delta is twice as contagious, more fatal, with more permanent side effects than earlier variants. And it’s killing more kids.

But it’s not the delta you have to worry about. If a future epsilon or zeta variant emerges, that can overcome our current vaccines, bred in the Midwest, the economy would shut down again and you can kiss your bull market goodbye. That would lead to a 1918 style finish to this pandemic, the fatality rate would go up to 50%, and millions more would die.

I’ll stick to the optimistic case….for now.

Even if we get a new variant, we now have the infrastructure in place to sequence the DNA of a new strain in a day and have 100 million doses in the freezer in two months. But it could be a close-run thing.

If you want to stick with your long portfolio in the face of millions dying here is the argument.

The Fed is unable to stimulate the economy any further through interest rate cuts or more QE. It is like pushing on a string. Companies can’t hire the labor they need to increase production or obtain the parts to make things.

This ends in August when workers get their free childcare back in the form of the public school system. The ending of Covid benefits will also light a fire under them. This will lead to a collapse in the unemployment rate and a further rise in GDP from the current ballistic 7.0% rate. This will allow the Fed to raise rates, but not enough to hurt stocks, especially techs.

This is your Goldilocks scenario for H2.

Driving down from Lake Tahoe to Long Beach to pick up my kids from Scout Camp, I passed two huge wildfires. Half the vehicles on the road (US 395) were fire trucks and crews moving in from other states. It’s like being at war.

So, you might ask the question of when will Climate Change affect the stock market? The answer is that Climate Change is actually great for stocks. Money gets spent to put fires out, then trillions of dollars get spent to rebuild with insurance claims.

The biggest impact of climate change is the decarbonization of our energy infrastructure, out of fossil fuels and into alternatives. Solar will soar from 20% to 70% of total electric power output in a decade while nuclear stays at 20% and hydroelectric at 10%. Coal and oil completely disappear. This will enable a large cut in our total energy bill.

Yes, I know oil has rallied lately. I’m sure American Leather had rallied on the way to zero, the only Dow stock to ever completely disappear. It was wiped out by the transition from horses to cars, eliminating 97% of the demand for leather. (The horse population went from 120 million to only 3.8 million today).

There are ways to play this today. Solar growth will be massive, so you have to look at the Invesco Solar ETF (TAN) and First Solar (FSLR).

Here is the next market top, at least for the short term. That’s because, for the last year, stocks have a nasty habit of selling off after quarterly earnings reports, which are just around the corner. Announcement dates for the FANGS are below. For the short term, you want to sell days before the reports. For the long term, you want to keep them, as I expect all to double or more in the next three years.

Facebook (FB) is July 28, 2021

Alphabet (GOOGL) - Jul 25, 2021

Apple (AAPL) Jul 27, 2021

Amazon (AMZN) Jul 26, 2021

Netflix (NFLX) Jul 20, 2021

Microsoft (MSFT) - Jul 28, 2021

China’s economy is slowing, with the post-Covid bounce over. It just provided $154 billion in stimulus for its economy and cut bank reserve requirements by 50 basis points. If they slow there, we could slow here, especially for big exporters to China in the ags.

Core CPI jumps to 5.4%, the biggest gain in 13 years. Excluding food and energy, it’s the biggest print since 1991. The Fed is holding its breath that these large numbers are temporary. Used car and truck prices accounted for a third of the gain for the second month in a row. That is certainly not sustainable, or I’m going into the used car business. Tech took off like a rocket on the news.

Producer prices show biggest gain since 2008, the is index up a hot 1.0% in June against 0.8% in May. PPI is up 7.3% YOY. Higher commodity and labor costs against shrinking inventories were the big issues. Inflationary pressures are here, but for how long?

Senate agrees to $3.5 trillion spending plan, providing great news for stocks and terrible news for bonds. No Republican support is required. This is in addition to the $579 billion infrastructure deal reach with opposition support. It’s enough dosh to keep this stock market percolating for years. Buy FANGS on dips.

Any tightening is a ways off, says Fed governor Jerome Powell in his congressional testimony, sending bonds soaring. The comment was in response to the superheated 5.4% CPI print on Tuesday. The $120 billion a month in Fed bond buying continues. Big tech loved it and continued with its non-stop rally. The rocket fuel for share prices continues unabated.

The four biggest US banks deliver spectacular earnings, posting a combined $33 billion in profits, triggering the predictable selloff. That is $9 billion above analyst forecasts, which seem to be a permanent lagging indicator. Consumer spending is exceeding pre-pandemic levels, credit quality is soaring, and credit card spending is through the roof. Buy (JPM), (BAC), and (V) on dips.

US retail sales come rocketing back, with customers spending those stimulus checks hand over fist. The 0.6% gain in June came on the heels of a 1.7% drop in May. Vaccinations are driving buyers back into the stores. Electronics stores, clothing, and restaurants saw the biggest increases.

Bank of America lowers US GDP from 7.0% to 6.5%, still the whitest hot numbers in history. 2022 is looking like 5.5%, still double the pre-pandemic rate. Personally, I think these numbers are low, and the stock market thinks so too. Keep buying dips in the good names.

Investors pouring out of bonds and into stocks, according to a survey of mutual fund flows last week. I couldn’t agree more. The Fed can’t keep holding on to zero rates forever, and when their turn comes, its will be brutal.

My Ten Year View

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!

My Mad Hedge Global Trading Dispatch profit reached a 1.84% gain so far in July. My 2021 year-to-date performance appreciated to 70.44%. The Dow Average is up 13.35% so far in 2021.

I spent the week running my two last positions, a long in (JPM) and a short in the (TLT) into the July 16 options expiration. Both expired at max profit. I then immediately strapped on a new short in the (SPY), my first since the pandemic began. That leaves me 90% in cash. I’m keeping positions small as long as we are at extreme overbought conditions.

That brings my 11-year total return to 492.99%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 42.56%, easily the highest in the industry.

My trailing one-year return exploded to positively eye-popping 108.94%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Coronavirus cases at 34.1 million and deaths topping 609,000, which you can find here.

The coming week will be a weak one on the data front.

On Monday, July 19 at 11:00 AM, the NAHB Housing Market Index for July is out. Johnson & Johnson (JNJ) and Verizon (VZ) report.

On Tuesday, July 20, at 8:30 AM, Housing Starts for June are printed. Haliburton (HAL) and United Airlines (UAL) report.

On Wednesday, July 21 at 11:30 AM, EIA Crude Oil Stocks are announced. Netgear (NTGR) reports.

On Thursday, July 22 at 8:30 AM, we learn the latest Weekly Jobless Claims. At 11:00 AM, we get Existing Home Sales for June. American Airlines (AAL) and Biogen (BIIB) report.

On Friday, July 23 at 2:00 PM, we learn the Baker-Hughes Rig Count. American Express (AXP) reports.

As for me, we all had to rearrange our budgets in the last year, dumping old spending habits and adopting new ones.

As for me, my electric scooter bill with Lime (click here for the site) has gone through the roof. They neatly fill the gap between walking and Uber in major tourist areas like Long Beach.

It’s a lot of fun, provided you don’t kill yourself on your first ride. The scooters go fast, some 20 miles an hour. Each one has a 13-mile range. When you’re done, you just drop it, take its picture, and then Lime picks it up and recharges it overnight.

I think I broke all seven of their mandatory rules (no driving on sidewalks, driving without a helmet, drinking while driving….). Hey, the great thing about being my age is that there are no long-term consequences to anything.

Stay healthy.

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

Check Out My New Wheels

Here is the Problem

July 12, 2021

Tech Letter

Mad Hedge Technology Letter
July 12, 2021
Fiat Lux

Featured Trade:

(RIDE THE MOMENTUM)
(SHOP), (NFLX), (FB), (AMZN), (GOOGL), (NFLX), (AAPL), (MSFT)

Ride the Momentum

Tech Letter

Just as millions of people in the United States are sensing that life has returned to something that resembles normalcy, the Coronavirus’ delta variant has emerged as American technology stocks biggest upcoming inflection point.

This certainly ups the ante in the struggle to grapple with the pandemic and has wide-reaching consequences for your technology portfolio.

Fresh data from the U.S. Centers for Disease Control and Prevention shows that more than half of all new cases in the U.S. were attributed to the delta variant, which is believed to be easily transmissible.

About 50% of Americans are fully unvaccinated meaning 50% are not, which could lead to hellacious autumn for the 175 million who are not.

The tech market has sniffed this out.

Data suggesting this variant is three times as infectious as the original coronavirus strain is the catalyst for a massive rotation into premium big tech who boast glamorous balance sheets.

It is still unclear if this virus is actually deadlier or leads to more severe illness, but the health of Facebook, Google, Apple, Microsoft, and Amazon aren’t reliant on the outcome of the delta variant or at least relative to companies that have physical storefronts.

I believe the momentum in these names will continue in the short term as more countries prepare to carve up new movement restrictions and quasi lockdowns to combat the new variant.

The recent tech rotation has been inconspicuous but powerful and the who’s who of big tech are enjoying a stellar run in the past month with FB up 6%, GOOGL up 4.5%, AAPL up 13%, MSFT up 8%, and AMZN up 11%.

These premium tech stocks are acting almost like U.S. treasuries and are increasingly defined as a perceived flight to safety because of

the net high quality of the assets.

Whether there is another virus that kills another 4 million globally again, investors are confident that these prioritized tech stocks are immune to any meaningful weaknesses.

On a granular level, pullbacks are becoming highly rare and mini pullbacks are becoming the only practical entry points into these stocks.

Readers waiting for a 5% drop are still waiting.

Reading waiting for 10% drops risk never getting in when the going is good.

Fresh news of Japan banning spectators for the upcoming and badly organized Tokyo Olympics took down GOOGL and FB 2% intraday only for shares to make up half the losses in one afternoon.

The delta variant has strengthened the “buy the dip” philosophy that is deeply entrenched in these 5 tech names.

The strength of tech can be seen further down the totem pole in inferior names.

Shopify (SHOP), Canada’s ecommerce crown jewel, is another winner with shares up 19% in the past 30 days.

If this rotation continues, I can realistically expect dips or sideways price action in Uber (UBER), Lyft (LYFT), and Airbnb (ABNB) because their investment case weakens relative to the big 5 in a delta variant world.

Netflix (NFLX) is another one that will harvest the low-hanging fruit with strong near-term action resulting in a 9% gain in the past 30 days.

It’s highly likely that in more than several regions around the world, the delta variant will re-silo consumers and hamstring businesses.

Crushing any green shoots that the reopening is supposed to deliver isn’t an ideal runway to growth.

Epidemiologists are starting to come out of the woodwork with Hungarian virologist Ferenc Jakab saying Hungary will be lucky to “get away with August” when referring to a possible 4^th wave.

This hasn’t been fully priced into the U.S. tech market and tech will enjoy a full-scale rotation if the 4^th wave arrives in full force.

However, I don’t believe we are on the cusp of another $12+ trillion bailout for the delta like last time go around, which does cap momentum to the upside.

There will also be a lack of meme stock profit-taking and bitcoin profit-taking that can be rolled into the big tech safety trade.

Sensibly, this could be a short-term boost for emerging growth tech as well with the likes of DocuSign (DOCU), Zoom Video (ZM), and Teladoc (TDOC) benefiting from investors dusting off the 2020 playbook again.

I forgot to mention that U.S. treasuries falling to $1.36% is the primary reason why at the balance sheet level, growth tech will also get the benefit of the doubt in the short term.

This won’t just be a big 5 momentum encore, others will enjoy the fruits of labor.

Loss-making tech is inordinately reliant on rates being low to subsidize losses and as the 10-year rate has gone from 1.72% to 1.36%, it’s no surprise that growth tech looks like eye candy now too.

Big tech is certainly more durable and has the capacity to navigate around rising rates which is the deal-clincher for me.

I am inclined to get back into the market with any delta scare that cheapens tech before the next leg up.

The embarrassing loss in the judicial system against FB by the Feds is the cherry on top.

I am bullish tech in the short term.

July 7, 2021

Diary, Newsletter, Summary

Global Market Comments
July 7, 2021
Fiat Lux

Featured Trade:

(JUNE 30 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (BRKB), (GOOG), (NVDA), (FB), (TSLA), (JPM), (BAC), (C), (GS), (MS), (NASD), ((X), (FCX), (AMZN), (MSFT), (AAPL), (FCX)

July 6, 2021

Diary, Newsletter, Summary

Global Market Comments
July 6, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or ALL EYES ON THE FANGS)
(FB), (AAPL), (AMZN), (MSFT), (NFLX), (NVDA), (AMD), (MU)

The Market Outlook for the Week Ahead, or All Eyes on the FANGS

Diary, Newsletter

If you are a believer in the FANGS (FB), (AAPL), (AMZN), (MSFT), (NFLX), with NVIDIA (NVDA) as an add-on, last week was definitely your week.

They rose every day, ending the week with a melt-up of epic proportions. After eight months in the penalty box, tech came back with a vengeance and is now two months into their comeback tour.

The icing on the cake was Facebook’s big win in the antitrust suit from the FTC. That suitably deep-sixes the issue not just for (FB) but all of big tech, possibly for years. The five stocks above now account for a hefty 22% of the S&P 500 (SPY).

The question now on everyone’s mind is what’s next for tech? 25%? 30% 50%? The answer is all of the above, but you have to give it some time, like years.

We are now in an overbought market where big tech has become the cheapest sector. In addition, the global chip shortage promises to get worse before it gets better, with some products seeing a 10X increase in a single generation.

Companies that can’t get the chips they want are resigning products around the chips they can get on the fly.

This has created enormous spillover demand for marginal suppliers like Advanced Micro Devices (AMD) and Micron Technology (MU). It has also accelerated the evolution of technology.

Companies that already have decade-long supply chains already set up, like Tesla, now have a big advantage. That’s why (TSLA) has managed a healthy 27% gain in six weeks.

The severity of the chip shortage is wildly estimated if you look at future design plans of the biggest industries. A tech rally lasting months, if not years, was a totally natural progression.

I’ll tell you who else is dropping the ball. Analysts and strategists are consistently underestimating the strength of the economic recovery and the torrid growth of earnings. They are lagging by about six months. That is why 80% of announcements have delivered upside surprises.

There are more surprises to come.

When markets peaked in April, an eye-popping 92% of shares were above their 50-day moving average. Now, we are only at 52%. That suggests we have another month of excitement before we get another short-term correction.

June Nonfarm Payroll Report comes in hot, up 850,000, an eye-popping 150,000 better than expected. The headline Unemployment Rate moved up slightly to 5.9%. Accommodation gained 269,000, and Food Services & Drinking Places were up 194,000. It was a true Goldilocks number for the stock market, but not the million some had hoped for. My 30% forecast for the Dow Average is looking good.

The Infrastructure Bill extends the hot economy well into 2023 and longer. Analysts better start upgrading now, who have been badly lagging behind the recovery. Tech stocks saw this six weeks ago and began their torrid rally. Buy everything on dips and stick with the barbell strategy to catch all of the rotations.

Rents will continue to go through the roof. Good thing you don’t live in Boise, ID, which is seeing the fastest rent increases in the county at 39% YOY. Of course, having the Micron Technology (MU) HQ there is a major push. Don’t expect any respite. With home prices soaring, rents will get dragged up as prospective buyers are priced out of the market.

Weekly Jobless Claims moderate further, 364,000 Americans filed new claims for unemployment benefits last week - lowest since pandemic. Still elevated from a typical pre-pandemic week when we would see about 210,000 claims.

Softbank’s capital flooding into Crypto, with Japan's SoftBank Group Corp has invested $200 million in Mercado Bitcoin, one of the largest cryptocurrency exchanges in Latin America signaling the start of the first phase of big institutional money hoping to take advantage of the digital currency craze.

Goldman Sachs is the top financial pick according to JP Morgan Chase. All cylinders are firing and we’ve just come off a fabulous 15% dip. A move to more sustainable revenue streams, like wealth management, is the reason, which Morgan Stanley did decades ago under my watch. I’m looking for $450 on dips. Buy (GS) on dips.

Morgan Stanley doubles its dividend, now that it has passed the Fed stress test and the tethers are off. It also announced a share buyback of $12 billion over the next year which may be increased. Buy (MS) on dips.

S&P Case Shiller National Home Price Index for April hits new high, up 14.6%, the biggest increase in 30 years. Phoenix leads at +22.3%, followed by San Diego at +21.6% and Seattle at +20.2%. The numbers run from incredible to unbelievable.

CRISPR Therapeutics goes through the roof, up 12% at the highs, on successful drug trials by Intellia Therapeutics (NTLA) and Regeneron (REGN). The Mad Hedge Biotech Letter core holding provided the gene-editing technology behind the 45% gain in (NTLA) today. It enabled the 85% elimination of a rare inherited fatal liver disease, transthyretin amyloidosis. Say that fast three times. Buy (CRSP) on dips. With Editas, there are only three small companies that have a monopoly here.

Facebook wins antitrust action, a federal judge dismissing an FTC action against the company. The move set the entire tech sector on fire. It looks like all of NASDAQ is going to much higher highs. I bet you had a great day. The court found that (FB) did not enjoy a monopoly which might have forced them to sell off Instagram and WhatsApp.

My Ten-Year View

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!

My Mad Hedge Global Trading Dispatch profit reached 0.71% gain so far in June on the heels of a spectacular 8.13% profit in May. That leaves me 100% in cash.

My 2021 year-to-date performance appreciated to 68.60%. The Dow Average is up 13.7% so far in 2021.

I spent the week sitting in 100% cash, waiting for a better entry point on the long side. Up this much this year, there is no reason to reach for the marginal trade, then maybe instead of the certainty. I’ll leave that for the Millennials.

That brings my 11-year total return to 491.15%, some 2.00 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 42.40%, easily the highest in the industry.

My trailing one-year return exploded to positively eye-popping 112.59%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Coronavirus cases at 33.7 million and deaths topping 606,000, which you can find here.

The coming week will be a weak one on the data front.

On Monday, July 5, markets are closed for the US Independence Day celebration.

On Tuesday, July 6 at 10:00 AM, the ISM Non-Manufacturing Index for June is released.

On Wednesday, July 7 at 10:00 AM, the Federal Open Market Committee Meeting from the last meeting are published.

On Thursday, July 8 at 8:30 AM, the Weekly Jobless Claims are published.

On Friday, July 9 at 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, with all the hiking I have been doing during the pandemic, I have been listening to a lot of WWII audio books lately. That reminds me of an old friendship I had with Toshiro Mifune, then the most movie famous star in Japan.

Mifune was drafted into the Japanese army during WWII where he served as an aerial reconnaissance photographer. After the war, that led him to work as a cameraman at Toho Productions, then the largest movie company in Japan.

A friend submitted his photo with an application for a casting call without his knowledge, and Toshiro, a good-looking guy, was one of 48 picked out of 4,000. He then met the legendary director, Akia Kurosawa, and the two launched the golden age of Japanese cinema in the late 1940s.

In just a couple of years, they produced blockbuster classic films like the Seven Samurai, Rashomon, and Throne of Blood, all of which are now required viewing by every American film school, and where Mifune demonstrated his impressive skills with a sword he picked up in the army.

I met Toshiro late in his career when he was cast as Admiral Isoroku Yamamoto for the 1976 Universal movie Midway. The problem was that Mifune couldn’t speak a word of English. I was brought in to bring Toshiro up to par in a crash course held at his west Tokyo mansion every afternoon seven days a week. We became good friends.

After a heroic effort, Mifune’s English was still awful, so the producers brought in a voice actor to dub Mifune’s part in Midway. That was Paul Frees, who provided the voice for the Disneyland’s Haunted House and Pirates of the Caribbean rides, as well as the cartoon Boris Badenov. His voice is still attached to those rides today, and I recognize it every time I take the kids.

Midway was a huge success and Mifune’s next big role was to play Commander Mitamura in Stephen Spielberg’s 1941. He followed that up with a role as Toranaga in James Clavell’s 1980 miniseries, Shogun, another old friend. (Clavell is a story for another day). My tutoring skills came back into demand once again, with better results.

Mifune died in 1997 at 77 and I miss him still.

Stay healthy,

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

June 30, 2021

Tech Letter

Mad Hedge Technology Letter
June 30, 2021
Fiat Lux

Featured Trade:

(BIG TECH WINS IN THE COURTROOM)
(AAPL), (AMZN), (GOOGL), (FB), (MSFT)

Big Tech Wins in the Courtroom

Tech Letter

Federal court dismissed antitrust lawsuits against Facebook that the Federal Trade Commission (FTC) and 48 states seek to pin on the digital ad company.

This isn’t only a feather in the cap for FB, but it’s great news for Google, Snapchat, Twitter and the who’s who of selling digital ads and any tech company that might be perceived as “dominant.”

Many would have been led to believe that big tech and these ad giants were on the cusp of being controlled by legislation, only for the federal court to not even bother with advancing the case.

It means that the law is firmly on the side of big tech and it will be almost impossible to pin charges against big tech unless the law is changed to accommodate a situation that is more conducive to proving that American tech companies abuse their positions in the US economy.

Personally, I do believe they have a monopolistic position against its competitors, but to prove that in court is a different animal with arguments needing to hold up against the test of time.

There is no doubt that the company has a dominant share of the market in the “personal social networking” industry, but market dominance just means they are incredibly good at what they do which is serving ads to targeted audience.

Nothing they do is explicitly illegal and that is the tough part and they do provide “free” services.

Not only that, but Facebook users can also simply not use social media and its various platform as a choice because they can drop it altogether or use a different platform entirely.

The court also dismissed a supplementary complaint by the FTC with the judge ruling that the states had taken too long to take issue with Facebook’s acquisition of Instagram and WhatsApp, which were acquired in 2012 and 2014, respectively.

The ruling made the government’s FTC look bad and tardy.

They also are late to the game, unable to understand the tech of our time and enforce borderline fringe behavior.

This is why anti-trust, which many believe is big tech’s largest existential risk, is not really a risk when politicians fail so miserably at even understanding what they do until 9 years later.

Most tech companies are happy to know they have 9 years to skirt the law and aggressively push their business models until the FTC move their finger an inch.

Might as well bet the ranch, right?

Certainly, there will be another wave of amended filed complaints against Facebook within 30 days, which the court will re-review.

But after some convicting loss, prospects look poor for the FTC.

The way in which the law is worded today means that Facebook has to be on the radar of investors as a premier buy the dip trade now that one of the bigger risks is off the table.

Facebook's valuation has more than doubled since the onset of the pandemic as more people use its diversified network of apps to stay in touch with friends and family in a socially distant world.

The social network had over 2.85 billion monthly active users in Q1 2021 and join other tech firms over $1 trillion such as Apple, Microsoft, Amazon, and Alphabet.

I would execute a bullish position in Facebook after a retracement from the 4% pop on the good news.

Tech is expensive and has had another resurgence over the past few weeks.

It continues to be an industry you cannot bet against and that is why you have to be patient for entry points to come to you.

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