(NVDA) Archives - Page 36 of 65 - Mad Hedge Fund Trader

May 24 Biweekly Strategy Webinar Q&A

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

Q: Should I roll over my $55-$60 Freeport-McMoRan (FCX) 2024 LEAPS?

A: Yes, move it from the January 2024 expiration to January 2025—that gives you a full 18 months for the stock to recover from a recession (which it’s now discounting) and then double, which is where you make the really big money on our LEAPS.

Q: What's your year-end price prediction for Freeport-McMoRan (FCX)?

A: $50, this year’s high.

Q: If there’s a default, do members of Congress get paid?

A: No, they don’t, no money is no money, the cupboard is bare. Nothing gets paid. And the Treasury will have to choose who gets paid last because when they run out of money there's no money to pay anybody, which then leads to a default and a 50% stock market correction.

Q: Why do you buy in-the-money bull call spreads instead of selling credit spreads?

A: They’re easier to understand for beginners. It’s easier for people to understand that if you buy something and it goes up, you make money. It’s harder for people to understand that if you sell short something and it goes down, you make money. And it’s basically six of one and half a dozen of the other in terms of profit. I get that question constantly and that is always going to be the answer.

Q: What do you think about artificial intelligence; how will it affect stock prices?

A: It’ll be what takes the Dow average ($INDU) from $32,000 to $240,000 over the next 10 years. What AI does is it automatically triples the value of any company using it, even though now it may take years for the stock market to catch up. On top of that, companies will have their regular earnings growth from their traditional businesses.

Q: How far will Nvidia (NVDA) stock go up?

A: Well the consensus between fund managers is it goes up 7 times from here, to well over 1,000. It's at 300 today, so it sounds like 2,100 is the final target, assuming we don't have any more recessions. And by the way, we did recommend NVDA on a split adjusted basis around $2, so NVDA has gone up 175 times already from our initial recommendation 7 years ago when it was just a gaming play. The (NVDA) January 2025 LEAPS I recommended on September 29 at 50 cents is now worth $6.25 and expires worth $10, up 20-fold!

Q: How can companies be selling AI prediction services for traders, as no one can predict the future?

A: Well that is accurate, no one person can predict the future. However, algorithms can take patterns in the past, project them in the future, and they're often accurate as long as a black swan doesn’t happen. AI is getting so sophisticated now—not only do we have index predictions which we’ve been using now for almost 10 years to great success, but Mad Hedge is now services with single stock recommendations. They will say in 30 days (AMZN) will be at $X, and they’re right 90% of the time. This is getting very advanced very quickly, and we are at the absolute cutting edge of this (and have been for a long time), and that’s why we’re getting such spectacular results—it's me plus my algorithm.

Q: Are money market funds at risk if the US defaults?

A: If the US defaults and stays defaulted, then yes. Nothing anywhere is safe except gold bricks under the bed. If the US does default, they’ll get defaulted probably in days. And that's what happened last time, 12 years ago. So, I don't expect the world to end.

Q: What is the best strategy for a long-term retirement account?

A: If you're already retired like over 70, I would go 100% into fixed income, and spread out your fixed income exposure to 10-year treasuries which is now yielding 3.75%, to junk which is yielding 8.5%. And you might throw in a couple high dividend stocks like (CCI). Over age 70 you basically are looking for a 100% income portfolio, because you’re too old to go back to work at Taco Bell if you lose all your money. And believe me, I’ve been to Taco Bell and seen the 70-year-olds working there who did lose all their money, so you don’t want to do that. Equities are for younger kids like me, who are going to live forever.

Q: What about iShares 20 Plus Year Treasury Bond ETF (TLT)?

A: We’re watching very closely. We will do LEAPS, but I’m waiting for a capitulation selloff triggered by inaction in Washington to get there. Also, when they do reach a deal, it unleashes a bunch of bond selling by the government. The US Treasury is going to have to sell 700 billion dollars’ worth of bonds immediately, because they’re behind on their bills, how about that? They’re not paying military contractors. So yes, the initial move of a debt deal could be down for bonds—that's the move I'm waiting for.

Q: Are you buying at the money’s or out of the moneys on LEAPS?

A: At the money if you’re a conservative old fogie like me, and out of the money like 20% or 30% where you get like a 400% return for younger people so they still will live long enough to earn back all the money if they lose it.

Q: What do you think the next move on CBOE Volatility Index ($VIX) is?

A: Up, and I think we could see VIX at $30 sometime in June or July when our 10% selloff happens.

Q: Would you buy the ProShares UltraShort S&P 500 (SDS) now for protection?

A: Yes, I’d be buying some as a hedge against your long-term positions.

Q: Do you prefer one or two year LEAPS?

A: Two years is the more conservative maturity because it gives you two years to go into recession and get back out. If you think there isn’t going to be a recession and we reaccelerate from here, then you only want to do one year. With Treasuries bonds, I’m inclined to do one year because I think once the rise in prices happens it’ll happen very quickly. If you’re not happy with a 100% return in a year maybe you should consider another line of business.

Q: Is the housing market going to crash because of 7% mortgage rates?

A: No, one third of all the buyers now are cash buyers, who are spending their savings and will refinance when mortgages get back to 3% or 4%. Until then, housing prices go sideways because there is a severe shortage of housing nationwide, which is getting worse.

Q: How do I get my wife used to regenerative braking in Tesla (TSLA)?

A: Just take your foot off the acceleration pedal; as the car slows down, each of the four wheels perform as generators and recharge the battery. That means when you drive from Lake Tahoe at 7,000 ft down to the Central Valley at sea level, your power consumption is zero. You’re getting a free ride because you’re gravity powered, the wheels are recharging the battery the whole time. All you have to do is take your foot off the acceleration and the regenerative braking kicks in instantly. Teslas only use actual use brake shoes when they slowdown from five miles an hour down to zero.

Q: Which level is more likely this year in oil: $50 a barrel or $100?

A: Well, if we do get the recession or something close to it, we’ll see the $50 first, and then we’ll see the $100 on the recovery. That is what’s going to happen.

Q: When is the economic recovery going to be this year?

A: In the 4th quarter, starting in October, and the stock market will start discounting that in July or August. That is my view.

Q: What’s a better investment: stocks or real estate?

A: It depends on the person. At this level, stocks will probably deliver bigger returns than real estate. But real estate allows you 5-1 leverage. If you have an 80% mortgage, and that’s more leverage than most people can get in the stock market. The other thing about homes is that you don’t get to see the price every day in the newspaper and then panic and sell at the bottom. That's the other great thing about houses.

Q: Will this recording be available?

A: Yes we post it in about two hours on the website. You can look at all the charts and the commentary then.

Q: How would you hedge a 100% equity portfolio?

A: I would buy deep out of the money puts on the S&P 500, maybe 10% out of the money on puts—something like a 360 put on the SPY with a 2 month maturity. That gets you through the summer, gets you through any debt crisis, and certainly will reduce the volatility of your portfolio.

Q: Would you be buying Alibaba (BABA) down here?

A: No, I don’t want to get involved in China in anything—too much political risk.

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 or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last 12 years are there in all their glory

Good Luck and Stay Healthy,

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

A Senior Citizen Teach Me the Computer at Taco Bell

May 22, 2023

Diary, Newsletter, Summary

Global Market Comments
May 22, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or CONCENTRATION OF WEALTH AT THE TOP)
(AAPL), (GOOGL), (AMZN), (MSFT), (NVDA), (TSLA), ($VIX), (JPM), (BAC), (C)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or Concentration of Wealth at the Top

Diary, Free Research, Newsletter

As I write this to you, I am flying at 30,000 feet over the red clay of Georgia. The azure blue of the Gulf of Mexico is on the left and the Golden State of California lies straight ahead.

I am returning from a five-day whirlwind tour of Florida, which saw me speak at three Strategy Luncheons and countless private meetings.

It was a blast!

Not only did I learn the local lay of the land, I often pick up some great trading ideas.

I first hitchhiked across the Sunshine State in 1967. Except for a few small towns on the coasts, there was nobody there. The entire inland of the state was covered with small cattle ranches and the odd tourist trap (mermaids, alligator wrestling, snake shows etc).

People thought the extensive freeway system was only built because the state was just 90 miles away from Cuba, then a Cold War flash point (it is officially called the “Dwight D. Eisenhower National System of Interstate and Defense”). Suddenly, somebody secretly started buying up land around Orlando. The locals thought General Motors (GM) was going to build a car plant there.

Then Walt Disney Corp (DIS) swept in and announced they were building a second Disneyland to cater to the east coast, creating an astonishing 70,000 jobs and the freeways started to fill up (click here for the video).

Today, driving around the state is a dystopian nightmare. The US population has doubled since the first Interstates were built in the 1950s, and the US GDP has increased by ten times, a byproduct of the Interstates. That means ten times more heavy truck traffic which has been mercilessly beating the life out of the roads. In Florida, the population has risen by more than fourfold as well, from 5 million to 22.2 million so you get the picture.

You lurch from one traffic jam to the next, even in the middle of the night. Whatever time Google Maps says it will take to get somewhere, triple it. The only consolation is that the traffic is worse in California.

I loved Key West where a very happy Concierge member made available an 1859 mansion close to the waterfront, restored and modernized down to the studs. By this time of the year, anyone with money has decamped for New England leaving only the retirees and beach bums.

I made the pilgrimage to Earnest Hemmingway’s home where he produced 70% of his published writings in only seven years. Another two boxes of manuscripts were discovered in the basement of his favorite bar last year.

It’s ironic that this state is now known for banning books that include sex and violence. Steinbeck’s work has already hit the dustbin, so old Earnest can’t be far behind.

What’s next? The Bible? It has lots of sex and violence.

As for me, Hemingway’s granddaughter, Mariel, stands out as the only Playboy cover girl I ever dated (April, 1982, I think). She is now happily married with three grown kids.

And yes, I did prove that it is possible to eat Key Lime Pie four days in a row.

As for the stock market last week, there really isn’t much to say. The concentration of wealth at the top continues unabated, as it is in the rest of the country. Stocks are still discounting a soft landing, while commodities, energy, and bonds expect a recession.

Go figure.

The top five stocks continues to suck all the money out of the rest of the market, (AAPL), (GOOGL), (AMZN), (MSFT), and (NVIDIA), the early beneficiaries of AI, accounting for 80% of this year’s market gains. Of the other 495 stocks, 250 are below their 200-day moving averages, meaning they are still in bear markets.

This is what has crushed volatility, taking the ($VIX) from $34 down to $15. The last time volatility was this low was just before the Long Term Capital Management fiasco where it languished around $9 (read Liar’s Poker by my friend Michael Lewis). When LTCB went bust, volatility rocketed to $40 overnight and stayed there for two years.

Options traders made fortunes.

Mad Hedge has nailed every trend this year. We bought tech and Tesla (TSLA) in January when we should have. We shorted ($VIX) every time it approached $30. Then we bought the banking bottom in March (JPM), (BAC), (C) and carried those positions into April.

We’ve been shorting Tesla strangles every month. And now we are 80% in cash waiting for the world to end one more time in Washington DC so we can load the boat with LEAPS and replay the movie one more time.

By the way, Mad Hedge has issued 25 LEAPS over the past year and 24 made money with an average profit of about 300%. Our sole loser has been with Rivian (RIVN), but even it still has 18 months to run. Never own an EV stock during a price war.

So far in May I have managed a modest 2.43% profit. My 2023 year-to-date performance is now at an eye-popping +64.18%. The S&P 500 (SPY) is up only a miniscule +9.00% so far in 2023. My trailing one-year return reached a 15-year high at +113.84% versus +10.87% for the S&P 500.

That brings my 15-year total return to +661.37%. My average annualized return has blasted up to +48.99%, another new high, some 2.74 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 22 consecutive trade alerts have been profitable.

I closed out only one trade last week, a long in the (TLT) just short of max profit a day before expiration. That just leaves me with a long in Tesla and a short in Tesla, the “short strangle”. I now have a very rare 80% cash position due to the lack of high return, low risk trades.

There’s a 1,000 Point Drop in the Market Begging to Happen. That’s what happens when the market rallies on a Biden McCarthy debt ceiling deal, which McCarthy’s own party then votes down. After all, it took McCarthy 15 votes to get his job. Just watch volatility, it’s a coming.

Weekly Jobless Claims Fall to 242,000, down from 264,000. It’s a surprise slowdown. The rumor is that last week’s highpoint was the result of a surge in fraudulent online claims in Massachusetts.

NVIDIA Could Rise Fivefold in Ten years, say fund managers. I think that’s a low number. The Silicon Valley company makes the top performing GPU’s in the industry selling up to $60,000 each. (NVDA) is seeing a perfect storm of demand from the convergence of AI and Internet growth. The shares have already tripled off of the October low.

Tesla is Considering an India Factory, as part of its eventual build out to 10 plants worldwide. The country’s 100% import duty on cars has been a major roadblock. India is now pushing a “Made in India” initiative. Good luck getting anything done in India.

Homebuilder Sentiment Up for 10^th Straight Month, as it will be for the next decade. There is no easy escape from a demographic wave. New homebuilders have figured out the new model.

India’s Tata to Build iPhones for Apple, in an accelerating diversification away from China. Apple has had too many of its eggs in one basket, especially given the recent political tensions between the US and the Middle Kingdom.

US Dollar Soars to Three Month High, as investors flee to safe haven short term investments. Rapidly worsening economic data is sparking recession fears. Ten consecutive months of falling inflation is another indicator of a slowdown.

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, May 22 there is nothing of note to report.

On Tuesday, May 23 at 4:00 PM EST, the inaugural launch of Mad Hedge Jacquie’s Post takes place. Please click here to attend this strategy webinar. The Federal Reserve Open Market Committee minutes are out at 2:00 PM.

On Wednesday, May 24 at 2:00 PM, the Federal Reserve Open Market Committee minutes are out.

On Thursday, May 25 at 8:30 AM, the Weekly Jobless Claims are announced. The US GDP Q2 second estimate is also published.

On Friday, May 26 at 2:00 PM, the University of Personal Income & Spending and Durable Goods are released.

As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie.

My family summer vacation that year was on the slopes of Mount Rainier in Washington State. Since it was raining every day, the other kids wanted to go home early.

So my parents left me and my younger brother in the firm hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for this story ). The deal was for us to hitchhike back to Los Angeles as soon as we got off the mountain.

In those days, it wasn’t such an unreasonable plan. The Vietnam War was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself anywhere.

When we got off the mountain, I looked at the map and saw there was this fascinating-sounding country called “Canada” just to the north. So, it was off to Vancouver. Once there I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east.

We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, artificially inseminating cows, and eating steak three times a day.

I made friends with the cowboys by reading them their mail, which they were unable to do since they were all illiterate. There were lots of bills due, child support owed, and alimony demands.

In Saskatchewan, the roads ran out of cars, so we hopped a freight train in Manitoba, narrowly missing getting mugged in the rail yard. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards and the wind blowing through your hair!

When the engineer spotted us on a curve, he stopped the train and invited us to up the engine. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth.

Our last ride into Montreal offered to let us stay in his boat house as long as we wanted so there we stayed. Thank you, WWII RAF Bomber Command pilot Group Captain John Chenier!

Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion with the ski jump roof. The pay was $1 an hour and all we could eat.

At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answer 20, and my brother answered 21. “Well, there’s my inventory problem” she replied.

And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her?

I had to allow two weeks to hitchhike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t. It wasn’t the last time my dad had to talk me out of jail.

We developed a system where my parents could keep track of us across the continent. Long-distance calls were then enormously expensive. So, I called home collect and when my dad answered, he asked what city the call was coming from.

When the operator gave him the answer, he said he would NOT accept the call. I remember lots of surprised operators. But the calls were free, and Dad always knew where we were. At least he had a starting point to look for the bodies.

We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far as Seattle with only three days left until high school started.

Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment.

I haven’t stopped traveling since, my tally now tops all 50 states and 135 countries.

And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night, our last ride of the day took us home and provided us with an extra bedroom, garage, barn or tool shed to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride.

It was the adventure of a lifetime and I profited enormously from it. As a result, I am a better man.

As for my brother Chris, he died of covid in early 2020 at the age of 65, right at the onset of the pandemic. Unfortunately, he lived very close to the initial Washington State hot spot.

People often ask me what makes me so different from others. I answer, “My parents taught me I could do anything with my life, and I proved them right.”

Good luck and good trading.

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

Summit of Mt. Rainier 1967

McKinnon Ranch Bassano Alberta 1967

American Pavilion Expo 67

Hamburger Stand at Expo 67

Picking Cherries in Michigan 1967

May 17, 2023

Tech Letter

Mad Hedge Technology Letter
May 17, 2023
Fiat Lux

Featured Trade:

(THE BEST TECH STOCK FOR SPECTACULAR GROWTH)
(NVDA)

The Best Tech Stock for Spectacular Growth

Tech Letter

Nvidia (NVDA) is expensive, but it’s expensive for a reason.

Readers need to participate in this epic move going on in Nvidia’s stock.

Anything resembling a dip will be bought because the demand for Nvidia’s products vastly outweighs the supply.

There are signs that Nvidia could deliver better-than-expected results thanks to the importance of the company's artificial intelligence (AI) chips, which carry a massive price tag.

Investors have been buying up the stock by the truckload on the hype around AI applications and how they are going to create terrific demand for Nvidia's chips.

They should deliver us a great forecast moving forward as AI is the hottest trend in town.

At the same time, investors shouldn't forget that a third of Nvidia's revenue comes from PC-centric businesses -- gaming and professional visualization. With PC sales declining at an alarming pace and a recovery still some time away, there is a chance of Nvidia's results and guidance not being up to analysts' expectations.

Nvidia gets nearly 60% of its revenue from selling chips deployed in data centers. The sizable influence of the data center business on Nvidia's top line could help it overcome the PC market's weakness, especially considering that companies involved in the development of AI applications made a beeline for its chips.

Nvidia's H100 graphics processing unit (GPU), which is used for training large language models and powers generative AI applications such as chatbots, sells for as much as $40,000. This robust pricing power is the reason AI is expected to substantially boost Nvidia's growth in the coming years, potentially adding billions of dollars to the company's revenue.

The good part is that investors may witness the impact of AI-related demand on Nvidia's business very soon. DigiTimes reports that the semiconductor bellwether reportedly placed more orders for data center chips at foundry partner Taiwan Semiconductor Manufacturing.

A closer look at how AI-related spending is booming gives us more reasons to believe that demand for Nvidia's expensive AI chips could be high.

Meanwhile, the AI chip market alone is expected to grow to a whopping $227 billion a year by 2032 from just $17 billion last year, according to Precedence Research. Nvidia is the leading player in this market, with an estimated share of 95% of the market for GPUs used for machine learning applications. It’s almost guaranteed to see AI turning out to be a long-term catalyst for the stock.

The company's solid pricing power in AI chips and robust demand for those chips could help Nvidia deliver such impressive growth.

If there is some macro event that jolts the market, that would be a perfect entry point into Nvidia shares.

The violent upswings in Nvidia make it difficult to find entry points; therefore, cherish those down days because they are so seldom.

The strong momentum in AI manifests itself directly in this one chip stock Nvidia.

Don’t miss the roller coaster ride to profits.

May 8, 2023

Diary, Newsletter, Summary

Global Market Comments
May 8, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or THE GOLDEN AGE OF BIG BANKING HAS JUST BEGUN)
(JPM), (FRC), (BAC), (C), (WFC), (AAPL), (GOOGL), (META),
(AMZN), (TSLA), (NVDA), (CRM), ($VIX), (USO), (TLT), (QQQ)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or The Golden Age of Big Banking has Just Begun!

Diary, Newsletter

The United States is about to change beyond all recognition.

Most investors have missed the true meaning of the JP Morgan takeover of First Republic Bank for sofa change, some $10.6 billion. It in fact heralds the golden age of big banking. The US is about to move from 4,000 banks to four, with all of the profits accruing at the top.

Look at the details of the (JPM)/(FRC) deal and you will become utterly convinced.

(JPM) bought a $90 billion loan portfolio for 87 cents on the dollar, despite the fact that the actual default rate was under 1%. The FDIC agreed to split losses for five years on residential losses and seven years on commercial ones. The deal is accretive to (JPM) book value and earnings. (JPM) gets an entire wealth management business, lock, stock, and barrel. Indeed, CEO Jamie Diamond was almost embarrassed by what a great deal he got.

It was the deal of the century, a true gift for the ages. If this is the model going forward, you want to load the boat with every big bank share out there.

And the amazing thing was that (JPM) made the highest bid among a half dozen contenders.

Along with Health Care, banking is the last unconsolidated US industry. We have five railroads, four airlines, three trucking companies, three telephone companies, two cell phone providers….and 4,000 banks?

Other countries get by with much less. England has five major banks, Australia four, and Germany two, one of which goes bankrupt every decade (I’m not naming names). America’s financial system is an anachronism of its federal system where each of the 50 states is treated like a mini country.

The net net of this will be a massive capital drain from the entire country to New York where the big banks are concentrated. Local economies in the Midwest and the South will collapse for lack of funding. The West Coast will be OK with behemoth technology companies spinning off gigantic cash flows.

The other big story here is the dramatic change in the administration’s antitrust policy. Until now, it has opposed every large merger as an undue concentration of economic power. Then suddenly, the second largest bank merger in history took place on a weekend, and there will be more to come.

All it takes is a Twitter run by depositors. Every weekend has become a waiting game for the foreseeable future.

Needless to say, this makes all the big banks a screaming buy. Hoover up every one of the coming dip, including (JPM), (BAC), (C), and (WFC).

Big is beautiful.

To prove I am not perfect, my position in First Republic Bank (FRC) still sits on my broker statement a week after it filed for bankruptcy, dead, moribund, and worthless as if it is some form of punishment. It’s a very small position but it stings nonetheless.

It’s like they want to punish me for leading them astray. They have been copying my trades for ages without paying for them and I hope they took a big one in (FRC).

So far in May, I have managed a modest +0.55% profit. My 2023 year-to-date performance is now at an eye-popping +62.30%. The S&P 500 (SPY) is up only a miniscule +8.40% so far in 2023. My trailing one-year return reached a 15-year high at +120.45% versus -3.67% for the S&P 500.

That brings my 15-year total return to +659.49%. My average annualized return has blasted up to +48.86%, another new high, some 2.79 times the S&P 500 over the same period.

Some 40 of my 43 trades this year have been profitable. My last 20 consecutive trade alerts have been profitable.

I initiated no new trades last week, content to run off existing profitable ones. With the Volatility Index at a two-year low at 15.78%, opportunities are few and far between. Those include both longs and shorts in Tesla (TSLA), a long in the bond market (TLT), and a short in the (QQQ).

That leaves me with only one remaining position, a short-dated long in the bond market. I now have a very rare 90% cash position due to the lack of high-return, low-risk trades.

The Fed Raises Rates 0.25%, likely the last such move in this cycle. Futures markets are now discounting a 25-basis point CUT by September, the beginning of a new decade-long falling rate cycle. The problem is that AI is creating more jobs than it is destroying, keeping the Fed fixated on the wrong data.

Nonfarm Payroll Jumps by 253,000, another hot number. The headline Unemployment Rate dropped to a half-century low of 3.4%. These figures suggest for rate hikes to come.

The JP Morgan Buys First Republic Bank from the FDIC, for $10.6 billion, thus wiping out the shareholders. It’s a huge win for (JPM), which picked up 87 branches and $90 billion in loans in the wealthiest part of the country, taking the share up $5. What you lost on (FRC) you made pack on (JPM) LEAPS. Live and learn. On to the next trade! The FDIC got out for nearly free, a big win for the government.

Government Default Date Moved Up to June 1, by US Treasury Secretary Janet Yellen, smacking the bond market for three points. The House remains an albatross around the bond market’s debt.

Europe Ekes Out 0.1% Growth in Q1, versus a 1.1% rate for the US. This is despite the drag of the Ukraine War, energy shortages, high inflation, and Brexit. What’s the difference between the US and Europe? We allow immigrants who become customers, while the continent doesn’t.

You Only Need to Buy Seven Stocks This Year, as the rest are going nowhere. That include (AAPL), (GOOGL), (META), (AMZN), (TSLA), (NVDA), (CRM). Watch out when the next rotation broadens out to the rest of the market.

Is Volatility Bottoming Now? The Fed announcement of a 25 basis point hike on Wednesday could end the move up in stocks. After that, shares will only have an imminent debt default and US government downgrade to focus on. ($VIX) seven-week fade will end that revisit the old highs in the high $20’s. Great shorting opportunities are setting up.

Oil (USO) Crashes 5% on US debt default fears in the biggest drop since January. This is the worst asset class to own going into a recession. EV competition is also starting to take a bite. No gas needed here. $66 a barrel here we come.

More Tesla Price Cuts to Come, with swelling inventories forcing Musk’s hand. The only consolation is that Detroit will suffer more. Musk is cutting profits while the big three are accelerating losses. Tesla has excess inventory for the first time in its 20-year history.

Apple (AAPL) Earnings Beat, led by stronger than expected Q1 iPhone sales at $53.1 billion. EPS came in at $1.53 versus $1.42 expected, revenues at $94.84 billion versus $92.96. Mac and iPad sales are down YOY. Services rose 5.3%. Apple bought back a stunning $90 billion of its own shares and paid dividends. The shares popped $3. The long-term growth play here is low prices phone in India where second hand phone sales have been burgeoning. That's why Apple is now offering to buy your old phone. Next stop: New Delhi.

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, May 8 at 7:30 AM EST, the Consumer Inflation Expectations are out.

On Tuesday, May 9 at 6:00 AM, the NFIB Business Optimism Index is announced.

On Wednesday, May 10 at 11:00 AM, the US Inflation rate is printed.

On Thursday, May 11 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Producer Price Index.

On Friday, May 12 at 8:30, the University of Michigan Consumer Sentiment Index for April is released.

As for me, I have been going down memory lane looking at my old travel photos looking for new story ideas and I hit the jackpot.

Most people collect postcards from their foreign travels. I collect lifetime bans from whole countries.

During the 1970s, The Economist magazine of London sent me to investigate the remote country of Nauru, one half degree south of the equator in the middle of the Pacific Ocean.

At the time, they had the world’s highest per capita income due to the fact that the island was entirely composed of valuable bird guano essential for agriculture. Before the Haber-Bosch Process to convert nitrogen into ammonia was discovered, guano was the world’s sole source of high grade fertilizer.

So I packed my camera, extra sunglasses, and a couple of pairs of shorts and headed for the most obscure part of the world. That involved catching Japan Airlines from Tokyo to Hawaii, Air Micronesia to Majuro in the Marshall Islands, and Air Nauru to the island nation in question.

There was a problem in Nauru. Calculating the market value of the bird crap leaving the island, I realized it in no way matched the national budget. It should have since the government owned the guano mines.

Whenever numbers don’t match up, I get interested.

I managed to wrangle an interview with the president of the country in the capital city of Demigomodu. It turns out that was no big deal as visitors were so rare in the least visited country in the world that he met with everyone!

When the president ducked out to take a call, I managed to steal a top-secret copy of the national budget. I took it back to my hotel and read it with great interest.

I discovered that the president’s wife had been commandeering Boeing 727s from Air Nauru to go on lavish shopping expeditions to Sydney, Australia where she was blowing $200,000 a day on jewelry, designer clothes, and purses, all at government expense. Just when I finished reading, there was a heavy knock on the door. The police had come to arrest me.

It didn’t take long for missing budget to be found. I was put on trial, sentenced to death for espionage, and locked up to await my fate. The trial took 20 minutes.

Then one morning I was awoken by the rattling of keys. My editor at The Economist, the late Peter Martin, had made a call and threatened the intervention of the British government. Visions of Her Majesty’s Navy loomed on the horizon.

I was put in handcuffs and placed on the next plane out of the country, a non-stop for Brisbane Australia. When I was seated next to an Australian passenger, he asked “Jees, what did you do mate, kill someone?” On arrival, I sent the story to the Australian papers.

I dined out on that story for years.

Alas, things have not gone well for Nauru in the intervening 50 years. The guano is all gone, mined to exhaustion. It is often cited as an environmental disaster. The population has rocketed from 4,000 to 10,000. Per capita incomes have plunged from $60,000 a year to $10,000. The country is now a ward of the Australian government to keep the Chinese from taking it over.

If you want to learn more about Nauru, which many believe to be a fictitious country, please click here.

As for me, I think I’ll pass. I don’t ever plan to visit Nauru again. Once lucky, twice forewarned.

Stay healthy,

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

April 26, 2023

Tech Letter

Mad Hedge Technology Letter
April 26, 2023
Fiat Lux

Featured Trade:

(THE FORTRESS)
(GOOGL), (MSFT), (NVDA), (META), (TSLA), (AAPL), (AMZN)

The Fortress

Tech Letter

This is a seven-stock tech market and there is no point to getting exotic and buying something aside from these 7.

That is what the price action is telling us.

Four of the seven are no other than tech overlords Alphabet (GOOGL), Amazon, (AMZN), Microsoft (MSFT), and Meta Platforms (META). These four Big Tech stocks alone account for 41% of the S&P 500's 2023 gain.

The other three are Apple (AAPL), which reports next week, Nvidia (NVDA), and Tesla (TSLA) stock.

These seven account for 86% of the S&P 500's 2023 gain.

These seven Big Tech stocks have essentially made the market this year and everybody else is dragging behind kicking and screaming.

Part of the great performance has to do with the market's oversold nature in 2022.

Rarely does a market operate at the extremes for so long.

These seven have done more than bounce back.

The January Effect is a seasonal increase in stock prices throughout the month of January. The increase in demand for stocks in January is often preceded by a decrease in prices during the month of December, in part due to tax-loss harvesting.

Second, many of these tech companies have been aggressively cutting costs.

I would even say again that Facebook cutting 25% of staff since 2022 is not enough.

Get rid of 80% like Twitter did.

Even more important, the world's most advanced AI models are coming together with the world's most universal user interface - natural language - to create a new era of computing.

Microsoft helped kick off Big Tech's AI obsession with its multi-year, multi-billion dollar investment in ChatGPT developer OpenAI.

MSFT has since implemented versions of OpenAI's technology in its Edge browser, Bing search engine, Microsoft 365 productivity software, and cybersecurity offerings.

Microsoft leading the AI means that rival Alphabet's Google (GOOGL) is playing catch up. Amazon (AMZN), meanwhile, is working to bring generative AI to its services, while Facebook parent Meta (META) is piecing together teams to kick-start its own efforts.

And while Microsoft’s stock has seemingly benefited from both the AI hype and overall market rebound after a rough 2022, the company's main growth driver continues to be its cloud computing efforts in its Azure unit.

But that growth has drastically cratered over the last year. In Q3 2022, Microsoft reported Azure growth of 46% year-over-year. But that's since fallen each quarter, landing at 27% in Q3 2023.

Part of the reason for this decline was large customers pulling back on spending as higher interest rates challenged global growth. Microsoft is also contending with scarce PC sales, as demand from consumers and business customers falls from pandemic-era highs.

It’s easy to say that tech has fared quite well this year.

However, peel back the layers and the lack of participation in this tech rally is highly worrisome.

In a winner take all economy, we have never been reliant on a small group of stocks to save us from collapse.

Interest rates as high as they mean that without a strong balance sheet, it is tough sledding out there for the growth companies.

In the short term, I fully expect tech companies with poor fundamentals to struggle and show minimal price appreciation as recession risks pile up.

These 7 should be a fortress for investors looking to protect their wealth.

April 21, 2023

Diary, Newsletter, Summary

Global Market Comments
April 21, 2023
Fiat Lux

Featured Trade:

(THURSDAY, MAY 18, 2023 TAMPA, FLORIDA STRATEGY LUNCHEON)
(SOME BASIC TRICKS FOR TRADING OPTIONS)

CLICK HERE to download today's position sheet.

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