Global Market Comments
April 17, 2025
Fiat Lux
Featured Trade:
(THE MAD HEDGE TRADERS & INVESTORS SUMMIT REPLAYS ARE UP)
(APRIL 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (SH), (SDS), (TLT), (MSTR), (GLD),
(GOLD), (SLV), (AGQ), (NEM)
Tag Archive for: (MSTR)
Below, please find subscribers’ Q&A for the April 16 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.
Q: Is it time to get out of the (SH), which is the short S&P 500 LEAPS?
A: I would say no. We're still very deep in the money for the LEAPS I put out two months ago. I doubt we're going to new highs by August when that LEAPS expires, so I would hang on to it, especially if you have other longs on the stock market. But if you're nervous, you probably have at least a 50% profit in that anyway, so take the money and run.
Q: Could the S&P 500 trade down to 4,500?
A: Absolutely, yes. China is kind of in a good position. They can wait. They can wait a very long time until they get what they want. We can't. Trump needs China to fold immediately, or the trade with China will cause a never-ending recession in the US. Remember, we have elections here—in China, they don't. That puts them in a very strong negotiating position. That's why you're seeing basically all economic data roll over and point to a recession. Even if some settlement is negotiated, there still will be some tariffs left. They just won't be at 145%. You know, it’s not a great investment environment to bet your retirement savings on, and certainly not an environment to engage in very rapid short-term trading unless you have 50 years of experience like I do. That's why I'm up this month, and the rest of the world is getting absolutely crushed.
Q: Are you going to send more LEAPS?
A: LEAPS are something we do at market bottoms, not tops, because we have such enormous leverage in the LEAPS trade—they’re usually 10 - 1 to 100 - 1 leverage. At some point, there'll be a lot of fantastic LEAPS in technology stocks, but I don't think we've hit bottom yet. In fact, at best, they've mounted weak bounces over the last few days. So, the charts still look terrible—not a good time for LEAPS.
Q: When do you see the bottom?
A: I have no idea, nobody has any idea. It's like economic policy is changing hour by the hour. Best thing to do is nothing in that situation—and that's what most of the economy is doing. That's why the economy is shutting down. Nobody knows what the final picture will look like—the uncertainty is the greatest since the uncertainty of the pandemic, or 9/11 before that.
Q: Should I hide in a money market fund?
A: No, with the money market fund, you run credit risk with the issuer of that fund. With 90-day US Treasury bills, there's no risk, so you have a government guarantee to get all your money back on the maturity date. If your custodian goes bankrupt, you can always get the T-bills back. It may take you three years in custodian bankruptcy proceedings to get your money market fund back. That’s what we saw with MF Global in 2011.
Q: What is the end game of the China-US trade dispute? How does it affect the stock market?
A: Well, we can't see an end game. Basically, you have two counterparties who are stubborn as heck, and we could be stuck in no man's land for a very long time. You'd have to think eventually a settlement of some type comes. Is that worth a recession for the U.S? For most people, I doubt it. And what if China just wants to wait out Trump and wait for the tariffs to go away in four years? That is a possible outcome. Stock markets always discount the worst-case scenario first before they discount anything else. I think that's what we saw last week, when we broke 5,000 in the S&P 500.
Q: Are you optimistic about bank stocks now?
A: No. They will lead the downturn along with technology stocks. But when this all ends, they will also lead the upturn, and that's why you're seeing bank stocks have such hard bounces off their bottom. It's another one of two sectors that people will be first to rush into—banks and technology stocks. And while tech is expensive, banks are cheap.
Q: How can interest rates fall when government policies, interest rate policies, are causing them to spike?
A: Well, it's very simple: when foreign investors lose faith in the U.S. Government, they have, they pull their money out. They don't need to be here. It's a situation of, “Well, if you don't need us, we don't need you.” And foreigners own about 25% of all of the $36 trillion in national debt out there, or about $9 trillion. And in stocks they own here and the number goes up to $12 trillion. It doesn't take much selling to cause a panic in the bond market. That is what we have been seeing. Whether that continues, I have no idea—it depends on the next tweet coming out of Washington.
Q: What about Bank of America (BAC)?
A: Yeah, it will also bounce the hardest off the bottom—great buy, and these things are all cheap relative to technology stocks. You know, banks still have PE multiples in the low teens. Tech stocks are all the way down to the low 20s from the 30s and 40s, so they're roughly trading at double the multiples of bank stocks. That's one reason people are rushing back into these.
Q: What's the basis of your prediction on a falling US dollar?
A: Again, it's foreign selling. I don't think I've ever seen a falling dollar and rising interest rates in 60 years of watching. It goes against all economic fundamentals in the currency markets. But when there's a panic, there's a panic. People want out of everything at any price, and that's what's happening now. As long as foreigners are dumping our assets, the dollar will keep going down—dumping our assets means dollar selling after 80 years of dollar buying.
Q: Is gold the only safe haven?
A: Yes. We'll get into this in the gold section, but even gold went down for three days, and then wiser heads prevailed and it actually triggered a panic melt-up in gold assets. The miners were up 25% in days. That is another great weak-dollar play.
Q: How do you protect the US from a dollar fall?
A: Change our economic policies; end the trade war.
Q: Is it a good time to buy a house?
A: No, it is not, unless you can wait out the current downturn. High interest rate mortgage rates shot up from 6.5% to 7.1% in a week, and that basically kills off the housing market for the foreseeable future. And of course, when people are worried about their futures, their savings, and their assets, the last thing they do is go out and buy a house.
Q: Is there enough negative sentiment around now for us to go back into the bond market?
A: No. There is no precedent for the type of market action that's going on now. Will the U.S. government suddenly become reasonable? I doubt it. You can expect tweet bombs to happen at any time. So, people are just hoarding cash and avoiding risk at all costs. It used to be that bonds were the safe place to go. No longer. Not with 10% moves down in a week like we saw last week. Sorry—T-Bills are the only actual safe play out there, and their yield is the same as Treasury bonds without the risk.
Q: Will crypto keep going down?
A: If we continue with a risk-off market, I think you can expect crypto to keep falling. Crypto fell 30% from its top—at least Bitcoin did. It's basically matching the downside with tech stocks one for one, so no protection in crypto, no diversification. The protection aspect that was promised by crypto promoters lever shows. No flight to safety is happening there whatsoever. And that's why I'm looking to add to my short in MicroStrategy Inc. (MSTR)—they're a leveraged long Bitcoin play.
Q: Is the U.S. economy set for a hard landing?
A: I think absolutely, yes, the hard landing is in progress. That's what all of the economic data says. It's hard to find any positive news coming out of the economy—people are running for their lives, essentially.
Q: Do you expect inflation to return and take stocks lower?
A: Absolutely, yes. The highest tariffs in history start hitting retail prices in the next month or two, and the price increases should be dramatic, especially on anything from China. So yeah, we should see that come out in the data in the next few months.
Q: Do you expect silver to follow gold?
A: Yes, I do, but it hasn't been performing as well because there is a recession drag on silver, which you don't have for gold. Silver (SLV), (AGQ) are used in a lot of electronics and solar panels.
Q: When do you get back into gold (GLD)?
A: Whenever we get a dip. So far, any dips have been very brief and short-term. It's kind of reminiscent of the 1970s when gold moved from $32 an ounce to $900. That’s when you found me in a line in Johannesburg, South Africa, waiting to sell all my Krugerrands.
Q: Which countries will benefit from manufacturing moving out of China?
A: The answer is really no countries. As soon as manufacturing moves from China to another one like Vietnam, the US then puts punitive tariffs on that second country. So, there's no place to hide. It's really a war against the world. That's the message that the administration is putting out: if you don't want to build a factory here, we don't want to do business with you. We don't want your products. And most companies will do nothing. They'll wait this out, wait for a future president to eliminate all tariffs. Until then, international trade grinds to a halt. No trade makes sense at 145% tariff. Just to give you some idea on how much that is, if you buy a top end MacBook Pro for $8,000, and you pay the full 145% tariff, that is an $11,600 tariff if you have to pay it, which brings the total cost of a MacBook Pro to nearly $19,600. How many are you going to buy at that price?
Q: Do you think the Fed will cut interest rates?
A: No, we haven't seen the inflation data yet. They are backward-looking, and only after we see a sharp rise in prices will they raise rates. Chances of them cutting now are zero with all the risks in inflation to the upside right now and unemployment still under control. So, no interest rate cuts this year.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
April 14, 2025
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD or REARRANGING THE DECKCHAIRS ON THE TITANIC),
(SPY), (GLD), (NFLX), (NVDA), (TLT), (MSTR), (SVXY), ($VIX)
(AMZN), (AAPL), (GOOGL), (PANW), (NFLX), (CORN), (WEAT), (SOYB)
Back in 1987, I flew my Cessna 340 twin from London to Rome to visit Morgan Stanley’s high-end Italian clients. Held over by meetings, I got a late start, and I didn’t get as far as the French Champagne country until midnight. Right then, at 20,000 feet, the gyroscope suddenly blew up with a great resounding “thwacking sound.”
I instantly lost all instruments and lights, but still had a radio. I commenced a very wide spiral dive in the pitch-black darkness. Paris control started yelling at me because I was deviating from my approved flight plan. I started to pass out from vertigo.
Then I did what all Marines and Eagle Scouts are taught to do in this situation.
I improvised.
I pulled a flashlight and canteen out of my cockpit side pocket. By steering to the water level, I was able to use it as an artificial horizon level and straighten out the plane. Then I used the Girl Scout compass I always kept around my neck and plotted a rough course to Paris. Then I got on the radio.
“Mayday, Mayday, Mayday, N3919G complete instruments failure, request emergency landing at nearest airfield.” The air went dead for 30 seconds.
Then I heard “N3919G, cleared for approach Charles de Gaulle, steer 240 degrees and change over to 118.15.” As I made my final approach, the Eiffel Tower sparkled off my starboard wingtip. I could see the entire Charles de Gaulle fire department (Sapeurs Pompiers in French), blinking their blue lights. When I hit the runway, they chased me all the way until I stopped.
Then a captain elaborately dressed in firefighting gear stepped out of his fire engine cabin and asked, “Are you alright?”
The experience reminds me of the government’s current economic policies. They are attempting to rebuild the engines of a plane while flying at 20,000 feet in the dark with no tools or instruments. Except there are 340 million passengers this time, not just one.
Will we pull out of the dive before we crash?
Back in January and February, my biggest concern about the markets was complacency. It is safe to say now that this concern has completely vanished, not just by me but everyone.
I have been looking for parallels to the current crisis, and there are few to choose from. Stocks, bonds, oil, commodities, and the US dollar are all crashing at the same time. S&P 500 multiples (SPY) have been marked down from 22X to 18X in a mere two months, and 16X or 14X beckon. The NASDAQ multiple has collapsed from 31 to 21. Small caps (IWM) were hit the hardest, falling to 2016 levels.
It was the action in the bond market that was most concerning, which was hit by massive waves of selling from both foreign investors and hedge funds facing margin calls. Liquidity has disappeared and the Treasury was ill-equipped to deal with this because DOGE just fired 10,000 of their people.
Most don’t realize that US bonds are the lifeblood of the global financial market. When they drop 10% in a week, as they just did, ripples become tidal waves. Suddenly, banks are undercapitalized, central banks and companies have to mark down reserves, and margin calls run rampant.
A national debt of $36 trillion, which was happily ignored for 25 years, instantly becomes a crisis. Is US debt headed for junk status? Will Trump impose capital controls to stem the outflows? You might call these questions fanciful or born of conspiracy theories, but I was woken up every morning last week from European banks asking exactly this. When they start asking in the debt markets, you have a problem.
All earnings reports coming out now can be torn up and thrown out the window. That’s because they reflect profits from an ancient economy in the distant past that no longer exists, like January-March 2025.
Back then, it was about a growing globalized economy spinning off ever-increasing profits and higher multiples and share prices. Now it’s about a shrinking global economy at war with itself, declining profits everywhere justifying lower multiples and share prices.
Last year, S&P 500 earnings came in at $240. Two months ago, the consensus forecast for 2025 was $270. Now it’s moving towards $230.
The average price earnings multiple is now back up to 20X. The 120-year average is 14X. American exceptionalism picked up another 8 multiple points after WWII. If we give all that back and the multiple returns to 14X that gets the (SPX) down to $3,220, or off 47.5% from the February high.
Confidence levels are collapsing at 50-year lows. We’re rearranging the deckchairs on the Titanic while we’re headed straight for a giant iceberg, and it's dark and darn cold outside. We are not getting a reversion to the mean in stock markets; we are getting a reversion far beyond the mean. Markets won’t bottom until all the worst-case scenarios out there are fully discounted.
The shock to the global financial system is of the same magnitude as when Nixon took the US off the gold standard in 1972. That’s why gold is rocketing now as then. The US dollar then lost half its value.
This is the first bear market created by government policies since 1930, back when the Smoot-Hawley Tariff Act started the last major trade war. When the current policies end, the bear market will end and not before then. We are now within days, if not hours, to the complete collapse of the global financial system. The global economic pie is rapidly shrinking, and everyone is fighting over the scraps that are left.
Trillions of dollars of capital from corporate America have been stranded abroad in the wrong countries because Trump convinced them to move there eight years ago, like Vietnam. Millions of small businesses unable to eat the tariffs or pass them on to consumers will go out of business.
With no policy changes from Washington expected any time soon, it’s likely that we will eventually exhaust selling and enter an “L” shaped bottom. That has stocks bottoming out and then moving sideways in a range for a long time. You can forget about any immediate sharp “V” type recovery that takes us back to the all-time highs we saw in February.
So you should use any rally in the stock market to sell short calls against the long equity positions you want to keep. If you want to be more proactive than that, I have some clever ideas for you.
We now know that Trump is willing to resort to gaming the market by talking it up whenever the S&P 500 hits 5,000. That’s because he is taking immense heat from Americans who have lost 20%-30% of their retirement funds in two months.
You can use the next plunge to 5,000 in the (SPX) to buy the best quality technology names like (AMZN), (AAPL), (GOOGL), (PANW), and (NFLX), which likely won’t go to new lows on the next crash and will rocket on any trade war success.
There are other fish to fry.
Let’s say that a tweet hits that the trade war is progressing or is about to end. What are China’s biggest US imports? Corn (CORN), wheat (WEAT), or soybeans (SOYB), which all have actively traded ETFs just above four-year lows. They will take off like a scalded cat on any good news.
The next time the Volatility Index ($VIX) takes a run at $60, buy the Proshares Short Vix Short Term Futures ETN (SVXY), an exchange-traded fund that sells short futures in the ($VIX). You can buy shares in it like any ETF. There is no expiration date. It hit a low of $32.90 on Thursday, but traded as high as $40 the week before, and $50 in December.
By the way, icebergs don’t enter the Atlantic shipping lanes anymore. Global warming has melted them before they do. The few that do drift south are tagged with transmitters that show up on ship radars. So if you’re planning a trip to Europe this summer on the Queen Mary II, you don’t need to worry about suffering the fate of Leonardo DiCaprio.
The Financial Crisis Trade is Still On, with 10-year US Treasury bonds hitting 4.6% yields, the US dollar plunging to 3-year lows, and gold at an all-time high. Foreign investors are abandoning the US at an unprecedented pace. It turns out that confidence in the US was worth a lot more than we thought. You don’t know what you have until you lose it.
Trump Cracks, Caves, and Does a U-Turn, announcing a 90-day delay in trade tariffs forced by the imminent collapse of global financial markets. The 10% tariffs remain. Inflation is still on track to skyrocket. A Fed interest rate cut is now on the table for June to head off a recession. What is the long-term trend now? It’s anyone’s guess. But Christmas shopping is certainly going to be a lot more expensive this year.
China Imposes 125% Retaliatory Tariffs, and Europe is yet to come. China’s biggest US imports are all agricultural, and many commodities hit multi-year lows on Friday, delivering a knockout blow to US farmers just as the planting season begins. Shiploads of American grain may be left to rot in the ports as Chinese importers refuse delivery due to the dramatic price increase. Also announced were antitrust investigations of US tech companies and export restrictions on rare earths needed for tech products. It’s 1930 all over again.
Chinese Tariffs Raised to 145%, in a US retaliation to the retaliation. Markets tanked again. Most of the goods and parts cannot be obtained elsewhere. Recession fears are now going mainstream, it’s not just me.
Unemployment rises to 4.2%, a multi-year high, says the March Nonfarm Payroll Report. Nonfarm payrolls in March increased to 228,000 for the month, up from the revised 117,000 in February. Health care was the leading growth area, consistent with prior months. The industry added 54,000 jobs, almost exactly in line with its 12-month average.
Federal Reserve’s Powell Says Inflation to Rise, as a result of the larger-than-expected tariffs. But don’t expect any interest rate cuts until yearend when the Fed has the benefit of 20/20 hindsight on inflation.
Volatility Hits 16-Year High at 60, in overnight Asia trading. The ($VIX) peaked at 95 during the Financial Crisis in 2009. ($VIX) may not have peaked yet.
Oil Crashes, down an amazing $13, or 18% in a week, from $72 to $59. High dividend-paying (XOM) has collapsed by 18%. It is the sharpest fall in Texas tea prices since the 1991 Gulf War. Recession fears are running rampant, and no one wants to pay for storage until a recovery, which may be years off. Sell all energy rallies.
JP Morgan Raises Recession Risk to 79%, while credit investors remain sanguine even as funding stress threatens to build. The small-cap focused Russell 2000, which has been battered in the recent selloff, is now pricing in a 79% chance of an economic downturn, according to JPMorgan’s dashboard of market-based recession indicators. Other asset classes are also sounding alarms.
Q1 Gold Inflows Hit Three-Year High, according to the World Gold Council. Gold ETFs saw an inflow of 226.5 metric tonnes worth $21.1 billion in the first quarter, the largest amount since the first quarter of 2022, when global markets were grappling with the immediate consequences of Russia's invasion of Ukraine. This raised their total holdings by 3% to 3,445.3 tonnes by the end of March, the largest since May 2023. Their record was 3,915 tonnes in October 2020.
Canadian Visitors Fall 32%, in line with other forecasts of a collapse in international travel. That is why Delta Air Lines (DAL) crashed by 50% in three months. Conditions will get worse before they can get better. A weak dollar has caused the price of my Europe trip this summer to rise by 20%.
Consumer Confidence is in Free Fall. Friday brought a fresh signal that consumers were queasy even before Wednesday’s policy shift. US consumer sentiment tumbled to the second-lowest level on record in a University of Michigan survey, as inflation expectations soared to multi-decades highs. That result was based on interviews from March 25 through April 8, before the change in tack on tariffs.
Delta Pulls Guidance, citing the trade war’s impact on sales. The stock is down 50% in three months. No guidance from any company is possible or credible, as Q1 earnings took place in an ancient, more business-friendly world.
April is now up by -1.13% so far due to the explosion in implied volatilities in our hedged positions. A lot of the Friday options prices made no sense and may reflect broker efforts to increase margin requirements. That takes us to a year-to-date profit of +14.96% so far in 2025. My trailing one-year return stands at a spectacular +75.65%. That takes my average annualized return to +50.28% and my performance since inception to +765.85%, a new all-time high.
It has been another wild week in the market. I was forced out of longs in (GLD) and (TLT) thanks to panic-inspired out-of-the-blue freefall. I managed to hang on to my longs in (COST), (NVDA), and (NFLX) because they were so far in the money. I used a 25% rally in the leveraged long Bitcoin play (MSTR) to add a short. I also used a run by the Volatility Index ($VIX) to $54 to add the Proshares Short VIX Short Term Futures ETN (SVXY). Unusual times call for unusual trades.
Some 63 of my 70 round trips, or 90%, were profitable in 2023. Some 74 of 94 trades have been profitable in 2024, and several of those losses were really break-even. That is a success rate of +78.72%.
Try beating that anywhere.
My Ten-Year View – A Reassessment
We have to substantially downsize our expectations of equity returns in view of the election outcome. My new American Golden Age, or the next Roaring Twenties is now looking at multiple gale-force headwinds. The economy will completely stop decarbonizing. Technology innovation will slow. Trade wars will exact a high price. Inflation will return. The Dow Average will rise by 600% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. My Dow 240,000 target has been pushed back to 2035.
On Monday, April 14, at 8:30 AM EST, the Consumer Inflation Expectations are announced.
On Tuesday, April 15, at 8:30 AM, the New York Empire State Manufacturing Index is released.
On Wednesday, April 16, at 1:00 PM, the Retail Sales are published.
On Thursday, April 17, at 8:30 AM, the Weekly Jobless Claims are disclosed. We also get Housing Starts and Building Permits.
On Friday, April 18, markets are closed for Good Friday.
As for me, in 1987, to celebrate obtaining my British commercial pilot’s license, I decided to fly a tiny single-engine Grumman Tiger from London to Malta and back.
It turned out to be a one-way trip.
Flying over the many French medieval castles was divine. Flying the length of the Italian coast at 500 feet was fabulous, except for the engine failure over the American air base at Naples.
But I was a US citizen, wore a New York Yankees baseball cap, and seemed an alright guy, so the Air Force fixed me up for free and sent me on my way. Fortunately, I spotted the heavy cable connecting Sicily with the mainland well in advance.
I had trouble finding Malta and was running low on fuel. So I tuned into a local radio station and homed in on that.
It was on the way home that the trouble started.
I stopped by Palermo in Sicily to see where my grandfather came from and to search for the caves where my great-grandmother lived during the waning days of WWII. Little did I know that Palermo had the worst windshear airport in Europe.
My next leg home took me over 200 miles of the Mediterranean to Sardinia.
I got about 50 feet into the air when a 70-knot gust of wind flipped me on my side perpendicular to the runway and aimed me right at an Alitalia passenger jet with 100 passengers awaiting takeoff. I managed to level the plane right before I hit the ground.
I heard the British pilot of the Alitalia jet say on the air, “Well, that was interesting.”
Fire engines flashing lights descended upon me, but I was fine, sitting in my cockpit, admiring the tree that had suddenly sprouted through my port wing.
Then the Carabinieri arrested me for endangering the lives of 100 tourists. Two days later, the Ente Nazionale per l’Aviazione Civile held a hearing and found me innocent, as the windshear could not be foreseen. I think they really liked my hat, as most probably had distant relatives in New York City.
As for the plane, the wreckage was sent back to England by insurance syndicate Lloyds of London, where it was disassembled. Inside the starboard wing tank, they found a rag that the American mechanics in Naples had left by accident.
If I had continued my flight, the rag would have settled over my fuel intake valve, cut off my gas supply, and I would have crashed into the sea and disappeared forever. Ironically, it would have been close to where French author Antoine de St.-Exupery (The Little Prince) crashed his Lockheed P-38 Lightning in 1944.
In the end, the crash only cost me a disk in my back, which I had removed in London and led to my funny walk.
Sometimes, it is better to be lucky than smart.
Antoine de St.-Exupery on the Old 50 Franc Note
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
April 4, 2025
Fiat Lux
Featured Trade:
(APRIL 4 BIWEEKLY STRATEGY WEBINAR Q&A),
(DAL), (LCID), (RIVN), (MSTR), (PLTR),
(AAPL), (GLD), (TSLA), (SLV), (SPY)
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
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)
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
Global Market Comments
May 14, 2024
Fiat Lux
Featured Trade:
(LOOKING AT THE LARGE NUMBERS)
(TLT), (TBT) (BITCOIN), (MSTR), (BLOK), (HUT)
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)
