(MSTR) Archives - Page 3 of 6 - Mad Hedge Fund Trader

April 4 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the April 2 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: Why are there days when both bonds and interest rates are going up?

A: Well, there is a tug-of-war going on in the bond market. When recession fears are the dominant theme of the day, interest rates go down and bond prices go up. Remember, it's an inverse relationship. When the deficit and inflation are the big fears and you get those on the inflation announcement days—we get three or four of those a month—then interest rate goes up and bonds go down. That will be a big driver of stock prices because they are very sensitive to interest rates always.

Q: Do you think Tesla (TSLA) has hit bottom?

A: I don't think so. I think the declining sales continue. I think the Tesla brand has been severely damaged as long as Elon Musk stays in politics. Also, no one buys cars in recessions—sorry, but that is the last thing that people or companies want to buy is a brand-new car.

Q: What will happen to the smaller EV makers?

A: They will all go bankrupt. You know, unless they have a very rich uncle like Lucin Group (LCID) does—Saudi Arabia can keep pumping money in there forever. Amazon owns a big piece of Rivian Motors (RIVN) I don't think any of the small EV makers will make it because they now have Tesla to compete against.

Q: Do you have any way to short restaurant stocks as an industry?

A: I don't know of a single industry ETF for restaurants only. Restaurants are not an industry I have spent a lot of time studying because the margins are so low. I prefer a 70% margin to a 3% margin ones. There are a lot of things like consumer discretionary, so you just have to go shopping in the ETF world. There are more than 3,000 listed ETFs these days in every conceivable subsector of the economy, more than there are listed stocks, so there might be something out there somewhere. Yes, you are correct in wanting to short restaurants going into a recession as well as airlines, rental car companies, and hotels, but these things are already down a lot—you know, 40% or so. So, be careful shorting after these things have already had enormous declines in a very short time.

Q: Will the recession cause Democrats to win midterm elections?

A: If I were a betting man—and of course I'm not, I only go after sure things, —I would say yes. But, you know, 18 months might as well be 18 years in the political world. So, who knows what will happen? Suffice it to say that yesterday's election results were overwhelmingly positive for the Democrats and represent a very strong “no vote” for Trump policies and Musk policies. Even in Florida where they won, the victory margin shrank from 35% six months ago to 12%. That is an enormous swing in the electorate away from Republicans, and that's why the Republicans are very nervous about any election. That's why the Texas governor is blocking a by-election there. He’s afraid he’ll lose.

Q: Is Tesla (TSLA) toast for good?

A: If Elon Musk went back to Silicon Valley and just managed Tesla and kept his mouth shut on non-Tesla issues, I bet the stock would double from these levels over the medium term. So yes, it just depends on how much Elon Musk wants his $200 billion back. That's how much he's lost on the stock depreciation since December.

Q: Is it time to short Delta Air Lines (DAL)?

A: You kind of missed the boat. No point in closing the barn door after the horses have bolted. This was a great short in February, and the same with hotels and rail companies. So be careful of your biggest recession indicators; they have all already collapsed and are more likely to bounce along the bottom.

Q: What are the probabilities that the tariff war could backfire, and we end up with massive job losses and a shortage of goods?

A: Actually, that is the most likely outcome. In my humble opinion, we know big layoffs are coming already. Prices are going to go up, so people will buy less. And prices will go up a lot because of the tariffs, so it's the perfect, perfect economy destruction strategy. And of course, that all feeds directly into the stock market.

Q: Do you think a 10% decline is enough to reflect all of that?

A: Absolutely not. More like down 20% or down 30% to discount the destruction of the economy—some say by half. So, that's an easy question to answer.

Q: Do you think Palantir (PLTR) will recover from this dip?

A: Only when government spending resumes. That could happen sooner once we get some clarity on where the government is actually going to spend its money. Palantir claims they can save masses of money for the government by getting it just to use their software, and a lot of companies are making that claim, like Arthur Anderson, who also had all their contracts axed. So, we don't know. “We don't know” is the most commonly heard expression in the country today. We just don't know what's going to happen.

Q: And is Palantir (PLTR) cheap after a 40% sell-off?

A: No. It's still incredibly expensive and that is the concern.

Q: Is crypto a good short-term bet in this type of high volatility?

A: No, it's not. It's a horrible bet. A 10% decline in the S&P 500 delivered a 30% decline in crypto. If we drop another 10%, you can expect crypto to drop another 30%. You know, it's like a 3x long NASDAQ ETF. That's how it's behaving. So, I watch it very carefully as a risk indicator. If we get a substantial rally, I'm looking to short the big players in crypto, which would be MicroStrategy (MSTR) and ProShares Bitcoin Strategy ETF (BITO). Looking for a good short there or at least to write calls. The call premiums are extremely high on all these crypto plays—sometimes they're 84%.

Q: How much more inflation can the economy handle before we are in a deep recession?

A: Well, I think we're in recession now. Almost every inflation indicator is pointing to lots of upside and, of course, the tariffs haven't even started yet. They start today, and it'll take at least a month or two to see what the actual impact of the tariffs will be on local prices.

Q: Why do you think the tariffs will be damaging to the economy?

A: Virtually every economist in the world has agreed that the trade wars of the 1930s were a major cause of the Great Depression, but not the sole cause. The only economists that have changed their minds now are the ones that have just gotten Trump appointments. I mean, that's it, clear and simple. You raise the price, you get less demand—basic supply and demand economics. I'm not inventing anything new here. It’s basic economics 101.

Q: Here's a good question that has puzzled people for a century: If Copper is up, why is Freeport McMoRan (FCX) down?

A: Freeport is a stock first and a commodity producer second. When stocks crash, people flee to commodities, and that is what is happening. Chinese are buying up copper ingots as a gold alternative, and people are dumping Freeport because it's in an index. Some 80% of all the selling is index selling. So if you're in that index, your stock goes down regardless of your individual fundamentals. Whether it's a good company or not, whether your earnings are expanding or not, I'm seeing this happen in lots of other great companies.

Q: Is gold (GLD) subject to 25% import duties? What will that do to the pricing of gold?

A: Physical gold got an exemption, so it is not. However, gold stocks in COMEX warehouses in New York hit record highs as the managers rushed to bring in gold to beat the tariffs to meet the ETF demand in the United States. So there’s a lot of turmoil in that market, as there are in all markets now—people trying to beat the tariffs. By the way, I bought all the computer equipment my company needs for the rest of this year in order to beat the tariff increases because all my Apple (AAPL) stuff comes from China and they're looking at 60% tariffs.

Q: If the silver (SLV) does go to a new all-time high, does that mean the S&P 500 is going to an all-time high?

A: No, if anything (SPY) goes to a multi-year low. We may be losing a generation of stock investors here. That puts silver within easy range at $50.

Q: Will biotech stocks shift because of the policy changes?

A: They're losing their government research funding, the authorization process for new drug approvals has had sand thrown at it. Time delays have been greatly extended on new approvals and suffice to say, the leadership does not have the confidence of the industry, and biotech stocks are doing horribly. You know, when you appoint someone to head a department whose main job is to dismantle that department, that's generally really horrible for the industry, especially when the industry is dependent so much on government grants for research. We are losing a generation of new scientists. That puts off any cures for cancer, Alzheimer’s, or diabetes into the far future.

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

November 22, 2024

Diary, Newsletter, Summary

Global Market Comments
November 22, 2024
Fiat Lux

Featured Trade:

(WEDNESDAY, JANUARY 22, 2025 ST AUGUSTINE FLORIDA STRATEGY LUNCHEON)
(NOVEMBER 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(NVDA), (TSLA), (TLT), (OXY), (SLB), (MSTR), (USO), (PLTR), (SMCI), (KRE), (SMR), (UUP)

November 20 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below, please find subscribers’ Q&A for the November 20 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Lake Tahoe, Nevada.

Q: What are your stock recommendations for the end of the first quarter of 2025?

A: I say run with the winners. Dance with the girl who brought you to the dance. I think portfolio managers are going to be under tremendous pressure to buy winners and sell losers. And, of course, you all know the winners—they’re the stocks I have been recommending all year, like Nvidia (NVDA), Tesla (TSLA), and so on. And they're going to sell losers like energy to create the tax losses to offset their gains in the technology area. That could continue well into next year. Although, we’ve probably never entered a new administration with more uncertainty at any time in history, except maybe during the Civil War. I don’t think it will get as bad as that, but it could be bad.

Q: Is Putin bluffing about nuclear war?

A: Yes. First of all, Russia has 7,000 nuclear weapons, but only maybe 200 of those work. If he does use nuclear weapons, Ukraine will use its nuclear weapons in retaliation. During the Soviet Union, where did the Soviet Union make all their nuclear weapons? In Ukraine. That's where they had the scientists. They certainly have the Uranium—that's the hard part. You could literally put one together in days if you had the right expertise around. This will never go nuclear, and Putin has always been all about bluffing. There's a reason why the world's greatest chess masters are all Russian; it's all about the art of bluffing. So that doesn't worry me at all.

Q: Will Russia sacrifice a higher and higher percentage of its population in the war?

A: Yes, that is the military strategy: keep throwing bodies at your enemy until they run out of bullets.

Q: What is your prediction for 30-year US Treasury yields (TLT)?

A: They go higher. Higher for longer certainly includes the 30-year. The 30-year will be the most sensitive to long-term views of interest rates. If you get a return of inflation, which many people are predicting, the 30-year gets absolutely slaughtered. Adding a potential $10 trillion to the national debt, taking it to $45 trillion, is terrible for debt instruments everywhere.

Q: Should we be exiting the LEAPS that you put out on Occidental Petroleum (OXY) and Schlumberger (SLB)?

A: For Occidental, I would say maybe; it’s already at a low. The outlook for oil prices is poor, with massive new production coming on stream. Regarding Schlumberger, they make their money on the volume of oil production—that probably is going to be a big winner.

Q: What do you think interest rates will do as we go into the end of Powell's term in 18 months?

I have no idea. It just depends on how fast inflation returns. My guess is that we'll get an out-of-the-blue sharp uptick in inflation in the next couple of months, and when that happens, stocks will get slaughtered. People assume that inflation just keeps going up forever after that.

Q: Crude oil (USO) has been choppy at around $70 a barrel. Where do you see it going next year?

A: My immediate target is $60, and possibly lower than that. It just depends on how fast deregulation brings on new oil supplies, especially from the federal lands that have been promised to be opened up. As it turns out, the federal government owns most of the western United States—all the national forests and so on. If you open that up to drilling, it could bring huge supplies onto the market. That would be deflationary. It would be death for oil companies, but it would be a death for OPEC as well. Every cloud has a silver lining. OPEC has been a thorn in my side for the last 60 years.

Q: I'm tempted to buy stocks that are flying up, like Palantir (PLTR) and MicroStrategy (MSTR). What would be an experienced investor trade in these situations?

A: Don't touch them with a 10-foot pole. You buy stocks before they fly up, not afterwards. By the way, if anyone knows of an attorney who is an expert at recovering stolen Crypto, please contact me. I have several clients who've had their crypto accounts cleaned out. Oh, and by the way, the heads of every major crypto exchange have been put in jail in the last three years. Imagine if the heads of Goldman Sachs, Morgan Stanley Fidelity, and Vanguard were all put in jail for fraud and theft? How many stocks would you want to buy after that? Not a lot.

Q: Your recommendations for AI and chips?

A: I think you get a slowdown. In order to buy the new plays in banks, brokers, and money managers, you need to sell the old plays. Those are going to be technology stocks and AI stocks—AI itself will keep winning. They will keep advancing, but the stocks have become extremely expensive. And everyone is waiting to see how anti-technology the new administration will be. Some of the early appointments have been extremely anti-technology, promising to rein in big tech companies. If you rein in big tech companies, you rein in their stock prices, too. I am being very cautious here. The next spike up in Nvidia (NVDA) might be the one you want to sell.

Q: Do you think the uranium play will continue under the new administration?

A: Absolutely, yes. Restrain the Nuclear Regulatory Commission, and costs for the new nuclear starts up like (SMR) go way down.

Q: What do you think of NuScale Power Corp (SMR)?

A: I love it. Again, deregulation is the name of the game—and if you lose a city by accident, tough luck. Let's just hope it happens somewhere else. It's only happened three times before… Three Mile Island, Chernobyl, and Fukushima.

Q: Super Micro Computer (SMCI), what do you think?

A: Don't touch it. There's never just one cockroach. Hiring a new auditor to find out how much money they misrepresented is not a great buy argument to buy the stock. I'm sorry. Very high risk if you get involved.

Q: If Nvidia (NVDA) announces great earnings but sells off anyway, what should I do?

A: Get rid of it and get rid of all your other technology stocks because this is the bellwether for all technology. Tech always comes back over the long term, but short term, they may continue going nowhere as they have done for the last six months, which correctly anticipated a Trump win. Trump is not a technology guy— he hates California. Any California-based company can't expect any favors except for Tesla.

Q: Is there any reason why you prefer in-the-money bull call spreads?

A: Well, there are lots of reasons. Number 1, it's a short volatility play. Number 2 it's a time decay play, which is why I only do front months because that's when the time decay is accelerated. Thirdly, it allows you to increase your exposure to the stock by tenfold, which brings in a much bigger profit when you're right. If you look at our trade alerts, we make 15% to 20% on every trade, and 200 trades a year adds up to a lot of money. You can see that with our 75% return for this year. And it's a great risk management tool; the day-to-day volatility of call spreads is low because you're long one call option short the other. So, the usual day-to-day implied volatility on the combination is only about 8% or 9%. The biggest problem with retail investors is the volatility scares them out of the market at market lows and scares them back in at market highs. So, call spread reduces the volatility and keeps people from doing that. The risk-reward is overwhelmingly in your favor if you have somebody like me with an 80% or 90% success rate making the calls on the stocks. And, of course, having done this for almost 60 years, nothing new ever happens in the stock market—you're just getting repetitions of old stuff. All I have to do is figure out is this the 1970s story, the 1980s story, the 1990s, the 2000s, 2010s story? I have to figure out which pattern is being repeated. People who have been in the market for one year, or even 10 years, don't have that luxury.

Q: I’m having trouble getting filled on your orders.

A: You put out a spread of orders. So if I put in an order to buy at $9.00, split your order up into five pieces: at $9.00, $9.10, $9.20, $9.30, $9.40; and one or all of those orders will get filled. Another hint is that algorithms often take my trade alerts to the maximum price. Don't pay more than that price immediately, but they have to be out by the end of the day, so if you just enter good-till-cancel orders, you have an excellent chance of getting filled by the end of the day or at the opening tomorrow.

Q: Should I purchase SPDR S&P Regional Banking ETF (KRE)?

A: I'd say yes. That probably is a good buy with deregulation, making all of these small banks takeover targets.

Q: What should we be looking for in the fear and greed index?

A: When we get to the high end, like in the 70s, start taking profits. When we get to the low end, like the 20s, start buying and adding LEAPS and more long-term leverage option plays.

Q: What are we looking for to go short?

A: Much higher highs and a bunch of other monetary and technical indicators flashing warning signals, which are too many to go into here. Suffice to say, we did make good money on the short side this year, a couple of times on Tesla (TSLA), including a pre-election short that we covered in Tesla, and we were short a whole bunch of technology stocks going into the July meltdown. So, you know, we do both the long side and the short side, but it's been a long play—11 months this year and a short play for a month.

Q: Is the euro going back up eventually, or does the dollar (UUP) rule?

A: Sorry, but as long as the US dollar has the highest interest rates in the developing world and the prospect of even higher rates in the future, it's going to be a dollar game for the next couple of years.

Q: Will a ceasefire in the Middle East affect the markets?

A: No. The U.S. interest in geopolitical data ends at the shores—all three of them. So if the war of the last couple of years doesn't change the market—and it's been an absolutely horrific war with enormous civilian casualties—why should the end of it affect markets?

Q: What stock market returns do you see for the next four years?

A: About half of what they were for the last four years, which will be about 90% by the time Biden leaves office. You're going to have much higher interest rates and much higher inflation, and while the new administration is very friendly for some industries, it is very hostile for others, and the net could be zero. So, enjoy the euphoria rally while it lasts.

Q: What about crypto?

A: Well, I did buy some crypto for myself at $6,000, and I'm now thinking of selling it at $96,000. Would I recommend it to a customer? Not on pain of death—not at this level. You missed the move. Wait for the next 95% decline, which is a certainty in the future. And, by the way, absolutely nobody in the industry can tell you when that is.

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, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then click on 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

May 14, 2024

Diary, Newsletter, Summary

Global Market Comments
May 14, 2024
Fiat Lux

Featured Trade:

(LOOKING AT THE LARGE NUMBERS)
(TLT), (TBT) (BITCOIN), (MSTR), (BLOK), (HUT)

March 25, 2024

Diary, Newsletter, Summary

Global Market Comments
March 25, 2024
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE BEST WEEK OF THE YEAR),
(PANW), (NVDA), (LNG), (UNG), (FCX), (TLT), (XOM), (AAPL), (GOOG), (MSTR), (BA), (FXY)

The Market Outlook for the Week Ahead, or The Best Week of the Year

Diary, Newsletter

You need to have a sense of humor and a strong dose of humility to work in this market. After predicting last week that the market would NOT crash but grind sideways, it then posted the next week of the year. Stocks are actually accelerating their move to the upside.

Of course, we got a big assist from Fed Governor Jay Powell who practically wrote in his own blood a promise that interest rates would be cut at least three times by the end of the year. That is quite a gesture, and all risk assets loved it, even the ones that have been asleep for a year, like gold (GLD) and silver (SLV).

Miraculously, this does happen and there has been a big one over the last two years that nobody knows about.

Cheniere Energy (LNG) shipped 640 tankers full of natural gas (UNG) to Europe last year and 630 in 2022. One tanker provides enough gas to heat one million homes for a month. You can do the math. In total, it has sent out 3,400 tankers since 2016, mostly to China.

When Russia invaded Ukraine in 2022, Europe was totally dependent on Vladimir Putin for gas. Any doubt about the Russian supply was ended when the Nordstream undersea pipeline was mysteriously blown up. A total cut-off would have been an economic disaster and caused the collapse of NATO.

Two years ago, it was believed that even if we could get the gas to Europe, there were no facilities to liquefy natural gas as it is shipped back into natural gas. Then 16 floating de-liquefaction plants showed up out of nowhere.

Natural gas demand has been soaring in the US as well. Over the past 20 years, coal has dropped from generating 50% of the US electric power supply to only 19% (the unused American share of the coal was sold to China). That has eliminated 500 million tons of carbon dioxide from entering the atmosphere.

If you noticed that the skies over American cities are getting clearer, this is the reason.

Much has been made over Biden’s “pause” of permitting for new natural gas facilities. The reality is that it will take four years to build the 16 new gas export facilities that have already been approved. By then, we’ll have a new president. All Biden did was throw a bone at the environmental wing of his party. Such are the ways of Washington.

By the way, the Republican Party now has an environmental wing too. Who knew? It’s all proof that if you live long enough, you see everything.

One of the reasons I have been in love with cybersecurity stocks like Palo Alto Networks (PANW) for the past decade is that hacking is the ultimate growth industry. It never goes out of style, is recession-proof, and is growing at an exponential rate.

It is also getting more sophisticated. The big hackers are franchising their business models, inviting in criminals with minimal computer knowledge, vastly increasing their numbers. They are attacking small vendors to large companies to get access to the big ones. They are also picking targets too poor to afford the big cybersecurity companies. The City of Oakland is a classic example, which was prevented from paying its teachers for six months. And now they have AI.

Spending on cybersecurity is expected to grow from $188 billion in 2023 to $215 billion this year, a gain of 14.36%. The number of data breaches has rocketed by 78% over the past two years. Buy (PANW) on dips, which we are seeing right now.

“We’re going to need a bigger GPU” to borrow a famous line from Stephen Spielberg’s blockbuster Jaws.

If you want a peak at the future, both of our own and NVIDIA stock, check out the company’s latest entry into the chip wars, the $50,000 Blackwell GPU, available in a few months. In layman’s terms, it offers four times the computing ability but requires only one-quarter of the electric power, which is increasingly becoming an AI issue. It also uses deep learning to write its own software.

The chip was introduced by CEO Jensen Huang at the Developers conference in San Jose, which I attended in a venue normally occupied by rock stars. Huang started the conference by warning he was not there to sing. But perform he did, accompanied by a group of dancing robots powered by AI.

And while NVIDIA’s sales have tripled over the past year, you ain’t seen anything yet. When I recommended (NVDA) for the millionth time at $400 a share last October, my long-term target was $1,000. It recently hit $975, now stands at $943, and shows no sign of abating. NVIDIA could well keep powering on until the actual release of the Blackwell chip.

As in Jaws, I sense a feeding frenzy coming and (NVDA) shorts are the bait.

In February we closed up +7.42%. So far in March, we are up +3.53%. My 2024 year-to-date performance is at +6.67%. The S&P 500 (SPY) is up +9.22% so far in 2024. My trailing one-year return reached +56.98% versus +52% for the S&P 500.

That brings my 16-year total return to +683.30%. My average annualized return has recovered to +51.57%.

Some 63 of my 70 round trips were profitable in 2023. Some 11 of 19 trades have been profitable so far in 2024.

I miniated no new longs last week, content to let my existing longs run in Freeport McMoRan (FCX), bonds (TLT), and ExxonMobile (XOM). I am 70% in cash given the elevated state of the market and am looking for new commodity and energy plays to pile into.

Fed Chair Jay Powell Promises Three Interest Rate Cuts of 25 basis points each, at his press conference on Wednesday. Powell said he did not see "cracks" in the labor market, which he described as "in good shape," noting that "the extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved." These are very pro-risk statements. Buy the dips in everything.

Fed to Dial Back Quantitative Tightening, or QT from the current $120 billion a month. It’s a huge plus for risk assets and explains why the most liquidity-driven ones like gold and silver had such a great day. Buy (GLD) and (SLV) on dips.

The Dept of Justice Goes After Apple on Antitrust, on its 61.3% share of the US smartphone market. It accused the iPhone maker of blocking rivals from accessing hardware and software features on its popular devices. Google’s (GOOG) Android actually has a bigger global market share at 70.3% with Apple at only 24%. This is another waste of time that will last ten years and go nowhere.

Bank of Japan to Cut Interest Rates as Early as April, bringing to an end a 34-year stimulus program that was a dismal failure. The Japanese yen (FXY) should rocket, but Japanese stocks not so much.

MicroStrategy (MSTR) Dives 18%, the largest owner of Bitcoin, on a crypto correction. MicroStrategy is the largest corporate owner of Bitcoin. (MSTR) just completed a massive borrowing to buy more crypto at the top. After SEC approval of ETFs and the imminent halving, what is left to drive crypto? Avoid (MSTR) which was blindsided by the last 90% crypto correction.

Existing Homes Sales Soar 9.7% in February to 4.38 million units, on a seasonally adjusted annualized basis. Inventory rose 5.9% year over year to 1.07 million homes for sale at the end of February. That represents a still low 2.9-month supply at the current sales pace. Higher demand continued to push the median price higher, up 5.7% from the year before to $384,500.

Home Prices Have Risen by 2.4 Times the Inflation Rate Since 1960. The cost of a typical house in the U.S. is nearly half a million dollars: the median price for a home in the U.S. is $412,778, according to Redfin data. That’s what successful demographic tailwinds leading to a chronic housing shortage get you.

Boeing is Leasing 36 Airbuses, to meet its own unfilled orders caused by production delays. Another panel fell off an airborne plane last week in Medford, OR. Looking for missing parts has become a regular part of every Boeing landing. This is an act of desperation. Avoid (BA)

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, March 25, at 7:00 AM EDT, the US Building Permits are announced.

On Tuesday, March 26 at 8:30 AM, S&P Case Shiller for February is released.

On Wednesday, March 27 at 11:00 AM, the MBA Mortgage Data is published

On Thursday, March 28 at 8:30 AM, the Weekly Jobless Claims are announced. The final read of the Q2 US GDP is also out.

On Friday, March 29 at 2:00 PM, Personal Income and Spending is out. The Baker Hughes Rig Count is printed.

As for me, as I am about to take off for Cuba to visit Finca Vigia (Lookout Farm), the home of Earnest Hemingway and Martha Gellhorn I thought I’d review my long history with this storied family. This is where he finished For Whom the Bells Toll, his epic novel about the Spanish Civil War.

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 going back over 100 years.

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 and Ketchum Idaho. In 2023, he stayed at his Hotel Poste room in Cortina, Italy where he lived for five months during the 1950s. His Cuban residence was high on my list, now that Castro is gone.

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 this newsletter.

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

Hemingway in 1917

At Work on Hemingway’s Typewriter

Good Luck and Good Trading,

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

March 11, 2024

Tech Letter

Mad Hedge Technology Letter
March 11, 2024
Fiat Lux

Featured Trade:

(MICROSTRATEGY STRATEGIZES TO PROFITS)
(MSTR), ($BTC)

Microstrategy Strategizes to Profits

Tech Letter

There has been one tech company that has tied its fortunes directly to the price of Bitcoin ($BTC) and that is MicroStrategy (MSTR).

Gutsy is a word that would describe this direction, and some would even say it’s full out irresponsible.

The daring company has had to deal with fallout when bitcoin crashes and it was brutal in the PR world.

Yet as Bitcoin soars in price today, the co-founder of MSTR Michael Saylor should take a victory lap.

Saylor was on the receiving end of a great deal of scorn and criticism as Bitcoin tanked to $15,000 per coin.

Now the company is levering up some more to go bigger.

MSTR bought another 12,000 Bitcoin for $821.7 million, the second-largest purchase by the enterprise software maker since it began acquiring the cryptocurrency almost four years ago.

The fresh hoard raised MicroStrategy’s total Bitcoin holdings to around 205,000 tokens, or to more than $14 billion.

Saylor started buying Bitcoin in 2020 as an inflation hedge and alternative to holding cash. MicroStrategy has already spent more than $1 billion in Bitcoin in the first three months of 2024, more than half of last year’s total buying. The cryptocurrency is up around 675% since Saylor began buying.

The shift into Bitcoin has led to a revival in the share price of MicroStrategy, which has surged more than 1,000% since Saylor’s pivot.

The company’s market capitalization has increased to around $25.7 billion, topping the level that it previously peaked at in March 2000. MicroStrategy reached a settlement in December 2000 with the SEC over accounting fraud allegations.

The average price for the total holding is $33,706, according to the filing. Bitcoin reached a record high of more than $72,000.

The company also presides over a real software business and they believe that the combination of an operating structure including a bitcoin strategy will succeed.

MSTR’s focus on technology innovation provides a unique opportunity for value creation.

Being an operating company, MSTR’s software business remains a core revenue and cash flow generator.

In addition, it also enables them to acquire bitcoin through the use of excess cash or proceeds from equity capital raises or corporate debt capital raises and to pursue software innovations that leverage the bitcoin blockchain.

They’ve deployed these levers to increase bitcoin holdings in a manner that has created shareholder value.

Bitcoin development includes its Bitcoin acquisition strategy and Bitcoin advocacy initiatives.

MSTR’s software development includes BI, AI, Cloud, or Bitcoin and Lightning-related software development.

In 2024, they are hell-bent to shift focus to grow in AI plus BI, while accelerating a sharp transition to a cloud-centric operating model.

Key strategic goals are to grow cloud, innovate with AI, and increase profitability.

In December, they successfully deployed Google Cloud platform integration, furthering multi-cloud capabilities, and providing greater optionality to their customers.

I won’t say that MSTR’s software and cloud business will compete with the Silicon Valley Magnificent 7, but its existence is to support a risky Bitcoin strategy which is actually working effectively as we speak.

Sometimes risky bets pay off well.

Shares in this company will either skyrocket or go to zero depending on what Bitcoin does.

October 27, 2023

Tech Letter

Mad Hedge Technology Letter
October 27, 2023
Fiat Lux

Featured Trade:

(CRYPTO IS BACK AT IT AGAIN)
(MSTR), (BTC)

Crypto Is Back At It Again

Tech Letter

Cryptocurrency prices have been on a tear lately as bitcoin continues to rally on hopes a spot bitcoin exchange-traded fund will launch soon.

Last week Bitcoin had a 24-hour time period where it exploded 13% to the upside as the digital gold wakes up from its slumber.

Lately, it certainly is odd to see US treasury yield surpassing any type of volatility that crypto can offer proving that volatility is more about a time and place dynamic rather than a certain asset class.

The volatility meant that Bitcoin passed $35,000 for the first time since May 2022 even though it has pulled back a little today.

The rally could be fueled in part by investors who were betting against the crypto asset scrambling to cover short positions as well.

Bitcoin led cryptocurrency prices higher over the past two weeks after the SEC declined to challenge its court loss against Grayscale Investments (GBTC) and its effort to convert its Grayscale Bitcoin Trust into a spot bitcoin ETF on Oct. 13.

A U.S. appeals court ordered the SEC to review Grayscale's ETF application. The regulator could still reject the spot bitcoin application, but it would need a new justification to do so.

Institutional demand for a spot bitcoin ETF is stronger than ever before. For many institutions, it is a matter of when — not if — the SEC will approve a spot bitcoin ETF.

A spot bitcoin ETF would provide a regulated and accessible vehicle for bitcoin exposure, and also mark a major vote of institutional confidence.

MicroStrategy (MSTR) added 21% and the computer software company holds 158,245 bitcoin with an average purchase price of $29,582.

Sooner or later, unless regulation totally wipes out Bitcoin, crypto is likely to find itself finagling its way into 401K’s.

The longer it lingers around, institutional pockets, which are deep, will find a way to onboard it into its business model.

For many years, institutional money has stayed away from crypto primarily because it is built on nothing and most conservative investors want to see cash flow.

At least an asset like gold bullion, there is a physical nature of what one buys.

Yet, as the world becomes more digitized and globalized, institutional money is starting to take the bait.

To Bitcoin’s credit, the absolute collapse of volatility in the past few years has been an interesting talking point because too much volatility used to be the problem for this asset class.

There is a chance that as we begin to start a new economic cycle because of a Fed pivot, that $16,000 per Bitcoin at the end of December 2022 could register the low of the next cycle.

Bitcoin is more appealing as a risk-reward proposition now than it was exactly a year ago as the Fed embarked on an epic tightening cycle.

Throw into the mix that the quality of global government has cratered to a generational low and it makes sense for institutional backers from Blackrock to front-run the next bull market in crypto as capital looks to de-risk from fiat currencies.

This could finally end up being the run-up to $100,000 per bitcoin that everyone expected during the last bitcoin spike.

Readers can play this in the equity market by buying MSTR.

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