(NVDA) Archives

March 8 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the March 8 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, CA.

Q: Do you think the US dollar will drop this year?

A: Absolutely it will drop; in fact, the drop started in October last year. We’re actually six months into a bear market for the US dollar (UUP), and bull market for the yen (FXY), the British pound (FXB), the euro (FXE), and the Australian dollar (FXA). However, the rate-cutting scenario is on vacation, and when it comes back from that vacation, then we will see very sharply dropping interest rates, soaring bond prices, and a weak dollar. That scenario is certain to happen by year-end, probably by 10 or 20% —quite a lot. If you just want to buy the basket for foreign currencies, you can sell short the Invesco DB US Dollar Index Bullish Fund (UUP).

Q: Can stocks (SPY) and bonds (TLT) go up at the same time?

A: Well, they shouldn’t, and usually they don’t. But this time it’s different now because we’re all beholden to the interest rate decisions of the Fed. All asset classes are moving together like synchronized swimmers, which means that on days when the market believes that Powell is finished raising rates, you get big bull moves in stocks, bonds, commodities, precious metals, and beanie baby collectibles. And on the bad days like yesterday, where Powell really reiterates how tough his stance is on inflation is unchanged, everything falls in unison. It’s really become a liquidity/confidence/inflation on-off type market. We have been playing that like a maestro for the last six months and have made a ton of money. I hope it continues that way. “If it’s working, don’t fix it” is my philosophy on trading, which is constantly changing.

Q: Do small caps underperform or overperform in a rising rates era?

A: They always do poorly because small caps have fewer cash reserves, more leverage, and more exposure to interest rates, as opposed to large caps which, in the tech area, don’t borrow at all. They’re actually net creditors to the system so they make more money when interest rates go up. I imagine the interest income at Apple this year has to be absolutely gigantic. That said, small caps always lead recoveries because of their excess leverage, so that's why people are piling into small caps on dips right now. Going from terrible to just bad often generates the best stock returns.

Q: How long will “steering wheel falling off” news tank Tesla?

A: Well, it was worth a $6 dollar drop today in an otherwise weak market. First of all, if there are any actual problems with Tesla, they fix them immediately for free, and most of the fixes can be done with a software upgrade which they do at midnight the day of the recall. Second, a lot of these stories about Tesla problems are false, planted there by the oil industry, trying to head off their own demise. Third, when you go from making several thousand to several million cars a year, scaling up to mass production always uncovers some sort of manufacturing flaws. Tesla can fix them faster than anyone else. I remember when the first Model S came out 13 years ago, we had a hot day and all the sealants on the windows melted. They said they didn’t know because it doesn’t get that hot in Fremont California where they build the cars. They sent out a truck the next day and installed all new sealants on our windows. So that is part of living with Tesla, which seems bent on taking over the world. And I’m working on a major update on Tesla report. I listened to the whole 3.5-hour investors day, and I'll get that out when I get all the snow shoveled. Full disclosure: Elon Musk personally gave me a free $12,800 Tesla Powerwall three years ago. It’s the red one.

Q: I just bought the United States Natural Gas Fund (UNG) 14/15 2025 LEAP for $0.20 with UNG down 3%.

A: I’m going to share that LEAPS with all the Global Trading Dispatch members tomorrow. So far, only the Mad Hedge Concierge members have seen it. We’ll go into great detail in tomorrow’s letter about why you want to buy natural gas here and how you want to play it.

Q: It seems the Fed won’t be happy unless there’s a recession; am I reading this wrong?

A: I think Powell is striving for perfection—killing off inflation and lowering interest rates without a recession. I actually am hoping for a recession myself, even if it’s just for one quarter because that greatly increases market volatility and makes my bond long look like a stroke of genius. And let’s see if he can pull it off. He’s coming facing so many unprecedented challenges to the economy, like the pandemic, the end of liquidity, and the extreme worker shortage. It’ll be really interesting to see what happens. Multiple PhD theses in economics begging to be addressed in there.

Q: Will artificial intelligence cause another bubble?

A: Absolutely, yes. And if you’ve been in the market long enough, you become a bubble collector like me. Just off the top of my head, 3D printing, cold fusion, bitcoin, portfolio insurance, Nifty 50, eyeballs,—if I spent more time, I could come up with an endless list. And this is how Wall Street makes their money—they create bubbles by manufacturing compelling, irresistible stories that can be sold to the masses. Some of these like cold fusion, I know immediately won’t work for 20 years because of my physics background, and definitely not now. Some of these other ones are just flashes in the pan and never work. You just get used to an endless series of bubbles. AI is new only if you haven’t been watching. The share prices of Google, Amazon, Apple, have already had gigantic moves in the last 20 years, largely because of their use of artificial intelligence. So those are your plays—those and (NVDA), which provides the essential chips for artificial intelligence, and we’re active in all of these, both on the long and short side.

Q: Is climate change a hoax or a bubble?

A: If you think it’s a hoax, will you please come over to Incline Village and get the 12 feet of snow off my damn roof before the house collapses. I already can’t close any doors in the house because the weight of the snow is buckling the house and bending the door frames. If you finish the roof, then you can get to work on my deck which also has about 8 ft of snow and is at risk of collapsing, like many in town already have. This has never happened before. The climate has changed.

Q: How come there’s never mention of demographic shift in other parts of the world when there is in the US?

A: The US is the only country in the world where you can earn enough money to retire early. If you live on the coasts, you can sell your house for cash, move inland and never work again, no matter your age. There is no other country where you can do that. Maybe there will be in the future, but definitely not right now. People who complain about how awful the economy is here forget that this is the best economy in the world and has been so for a very long time. I go with the Warren Buffet outlook on this, which is “Never bet against America.”

Q: How about an Entry point for Freeport McMoRan (FCX)?

A: It’s lower. You don’t want to touch it while the entire commodity sector is selling off in fears of higher interest rates in a recession. Once that’s over it goes to $100.

Q: What is the best way to play Natural Gas?

A: I’ll send an extended report tomorrow, but the short answer is United States Natural Gas Fund (UNG) and ProShares Ultra Bloomberg Natural Gas (BOIL), which is a 2x long day trading NatGas ETF.

Q: Are we entering LEAPS territory for Rivian (RIVN)?

A: Yes, just wait for the current selloff to end and then go to the longest possible expiration. This thing will have a multiple move 2x, 3x, or a 10x out the other side of any recession. The CEO is brilliant and people love the cars.

Q: What happens to housing prices when interest rates on mortgages are at 7%?

A: Well, they should go down 10-20%. What they’re actually doing is going sideways, and they’re still going up in the cheaper neighborhoods because of the structural shortage of 10 million houses in the US. The all-cash buyers are still out there buying. There is tremendous inventory shortage in the housing market now; every broker I know got cleaned out of all their inventory in January when we had a brief 100 basis point dip in rates back then, which has since gone away. I think we go sideways in housing until the end of the year, and then big interest rate cuts will be obvious by then, and the market takes off and we have another 10-year bubble. If you think housing is expensive now, go visit Sydney Australia or Shanghai, China and you’ll see how expensive housing can really get.

Q: How how high would Fed funds have to get to cause a real recession?

A: My guess is 6%. We might actually get there in the second quarter. That might trigger enough of a recession to start unemployment rising just enough to let them cut interest rates. My attitude is: rip the Band-Aid off, raise by 75 basis points on March, and get it over with. But Jay Powell is a very gradualist type of guy, even though he’s brought the sharpest interest rate rise in history.

Q: Should I chase Apple (AAPL) here at $150 a share?

A: In this kind of market, you never chase anything. Only buy Apple at $150 if you think happy days are here again and you think we’re going up forever. To me on the chart it looks like we’re double topping and may actually get a lower low, which you then buy. You may even want to do a LEAPS on Apple if we get down into the $130s or $120s again.

Q: Isn’t it hard for the economy to really tank when seniors and savers are now generating income again for their retirement, giving them more income to spend?

A: Well not only that but workers have had 10-20% pay increases also, and they have more money to spend. It’s really hard to see a severe recession in any kind of scenario, barring another pandemic, and that’s why we’re saying buy the dips—we are in fact in a new bull market that started in October. When you get these market reversals, you often don’t get confirmation on the charts for up to a year, and we’re in one of those periods now. That's why there are still a lot of non-believers in the bull scenario and no confidence.

Q: Would you buy Tesla LEAPS?

A: Yes, under $150 on Tesla shares. And, given its record of volatility, we may actually get there, because this is a $1,000 stock easily in 5 years. I'll send you a report giving you all the details of why. Detroit is basically screwed, someday it’ll just be reduced to building Teslas under license from Tesla and painting them different colors and giving them different names or something like that.

Q: What’s a buy-on-dip?

A: Sorry, but no easy answer here. It’s unique to every stock depending on the historic volatility and ranges of the stock. It’s going to be 1% for a stock, it can be 10% for an option, it could be 20% for a stock like Tesla. It’s vague but it really is unique to every single stock. A good rule of thumb is that after you execute a trade and then throw up on your shoes you’ve just done a great trade.

Q: I see from your pictures that you lost weight? How do you do it?

A: I got COVID last May. I lost 20 pounds in two weeks because I couldn’t eat while I was sleeping 20 hours a day. I just woke up long enough to send out trade alerts. All of a sudden, a 40-year collection of expensive designer pants fit. My kids now call me Captain Fancy Pants. When I go through airport security now and take my belt off they fall down so I’m always careful to wear my best underwear, the ones with the dollar sing all over them.

Q: What’s the best way to play obesity drugs?

A: Unfortunately, There is no pure play on obesity drugs. It will be a $150 billion market that will grow very quickly. I will talk about it at length next week in the summit at the Biotech & Health Care webinar, which you’ll get registration links for tomorrow. Weight loss drugs are small pieces of very large drug companies, so the effect gets diluted by everything else they’re doing. The purest play may be Weight Watchers (WW). If you just need to go to Weight Watchers just to get a shot, that could be really good for them. The stock just doubled in one day on this.

Q: Commodity-based foreign stocks are the best bet on inflation protection; should I get involved?

A: Yes, use the current selloff to get into the whole commodity space (except for maybe food) because not only are they a commodity play, they’re a weak dollar play and that way you get a combined double leverage effect on prices, which I've seen happen many times in my life. So yes, look at foreign-type commodity stocks, and of course, the biggest one out there is Broken Hill Proprietary (BHP), which I always watch very closely. It’s the largest stock in Australia owned by virtually everybody in Australia who has any money, with great volatility, and which has recently just had a selloff.

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

2015 in Ouarzazate Morocco

March 6, 2023

Diary, Newsletter, Summary

Global Market Comments
March 6, 2023
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or A WEEK WITH JOHN THOMAS)
(SPY), (TLT), (TSLA), (NVDA), (WEAT)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or A Week with John Thomas

Diary, Evening VIP, Newsletter

In 1942, after the First Marine Division won the battle of Guadalcanal and my Uncle Mitch won his Medal of Honor, they were shipped to Melbourne, Australia for six months of rest and relaxation.

Since their uniforms were in rags and many men were barefoot, they were handed scratchy WWI surplus wool uniforms. That’s all the Aussies had, as their army was off fighting Rommel in North Africa.

All 8,000 men lived in the Melbourne Cricket Ground, and the government delivered a truckload of beer barrels every day. Whenever the men went outside, they were invited by local families off the street to have dinner. After four months, they were fat and happy.

Then one day, they were placed on a train with full battle gear, taken 50 miles out of town, and told to walk back with no food and a canteen of water. They were retraining for the next battle, which would be in New Guinea.

When economic data flip-flops, so does the market.

The red-hot January Nonfarm Report with the Unemployment Rate at a 50-year low of 3.5% gave the bulls every reason to buy stock. So stocks can’t fall.

But a strong jobs market means the Fed will keep interest rates higher for longer gives plenty of fodder for the bears. So stocks can’t rise.

My Mad Hedge Market Timing Index is equally confused at 55. You can’t get any closer to 50, which means you should do absolutely nothing.

Notice that the S&P 500 (SPY) bounced off the 200-day moving average at $390.95 to the penny and rallied, a perfect symptom of this disease. When the fundamentals are confused, technicals win.

At this late age, the only one I take orders from is named Mr. Market. Ignore his instructions at your own peril and expense. Everyone else can get lost.

That leaves us nothing to do but to wait for the next events of market consequence, the March 14 CPI and the December 22 Fed interest rate decision. We might as well twiddle our thumbs and watch the clock until then.

So I will stick to my market-neutral strategy as long as I must take in enough money to keep the lights on. I keep doing this knowing full well that the last time I do will lose money.

This could go on for months.

In the meantime, I will keep researching the long term, which continues to look better and better. The dross ends in months. It’s the next decade we need to focus on now.

It's time to polish our armor, sharpen our weapons, and get back in shape, just as the First Marine Division did 81 years ago.

Remember that we are in the “what’s next” business. Whatever you buy now has to be discounting the following coming trends:

Falling interest rates
A weak dollar
Rising commodity prices
Rising energy prices
Reaccelerating tech earnings
A new boom in real estate
Precious metals going to record highs
Strong emerging markets
A Ukraine win leading to global peace
America’s principal adversary is rendered impotent
A second peace dividend ensues

Every trade alert I send you this year will be taking of one or more of these trends. It’s just a matter of time before they begin if they haven’t already.

We had a really great last two days of February, pushing me back in the green for February, taking me up +3.41% on the month. March has so far come in at +0.80%.

My 2023 year-to-date performance is still at the top at +26.56%. The S&P 500 (SPY) is up +6.36% so far in 2023. My trailing one-year return maintains a sky-high +85.51% versus -5.66% for the S&P 500.

That brings my 15-year total return to +623.75%, some 2.72 times the S&P 500 (SPX) over the same period. My average annualized return has recovered to +47.37%, still the highest in the industry.

Nothing Happens Until March 14, at 8:30 AM EST when the next big inflation read, the Core CPI comes out. It’s all about inflation right now. Look for a flat line until then. That’s why it’s a good time to run short strangles and own lots of cash. A dollar at a market bottom is worth $10 at a market top.

S&P Case Shiller Gains 5.7% in December, YOY according to its National Home Price Index. That’s a quarter of the gains seen a year ago. Miami (15.9%), Tampa (13.9%), and Atlanta (10.4%) showed the biggest gains. High mortgage interest rates are still a big drag and will continue for another six months.

Pending Home Sales Soar 8.7% in January on a signed contract basis. It is the second straight month of gains and the biggest in 2 ½ years. See what a 1.5% drop in mortgage rates can do? While rates are back up now it shows how much demand is building up in the residential real estate market. I think this market explodes to the upside by yearend.

Mortgage Rates Jump to 6.65%, snuffing out the green shoots that briefly appeared in January. Mortgages are still maintaining an unprecedented 200 basis point premium to 30-year Treasury bond rates, which should disappear by yearend. The seeds of the next housing boom are germinating.

Tesla Tanks Semiconductor Shares, after Elon Musk announced that he plans to cut silicon carbide chips by 75%. Improved new designs will also slash the number of chips needed for EVs, whose supply and prices are notoriously volatile. New chip designs will appear in the $25,000 model 2 due out in 2025.

Ark’s Dirty Little Secret. Cathy Woods’ ARK Innovation Fund (ARKK) is one of the top-performing funds so far in 2023, up 24%. But strip out the performance of Tesla (TSLA) and the five-year return has been precisely zero. Good thing (TSLA) is up 110% this year. Maybe its cheaper just to buy (TSLA) and skip the dross and high management fees at Ark? Elon Musk thinks it’s going to $1,000 a share and so do I. Oh, and they just dropped the price of their top end Model X by $20,000.

Stellantis (STLA) Buys a Copper Mine, taking a 14.2% stake in Argentina’s McEwen Copper mine. Gee, do you think the owner of the Chrysler brand is going into EVs? They also laid off 2,000 because with 80% fewer parts EVs require far less workers. Buy Copper and Freeport McMoRan (FCX) on dips. The global copper shortage is imminent.

China Manufacturing PMI Hits 11-Year High, at 52.6 in a surprising comeback from the end of covid lockdowns. The news hit the bond market, worried about rising inflation prospects. Supply chain problems in the US should ease as a result.

Wheat Prices Crash, seeing a 6% dive in February. What always follows a food shortage? A food glut, as farmers overplant to cash in on generous government subsidies, creating a bumper crop. It’s only a 100-year cycle. Prices will stay low as long as Ukraine can keep exporting.

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 6 at 7:00 AM EST, US Factory Orders are out.

On Tuesday, March 7 January 31 at 7:00 AM EST, the Federal Reserve Governor Jerome Powell testifies in front of congress.

On Wednesday, March 8 at 7:00 AM EST, the JOLTS Job Opening Report is released.

On Thursday, March 9 at 8:30 AM EST, the Weekly Jobless Claims are announced.

On Friday, March 10 at 8:30 AM EST, the Nonfarm Payroll Report for February is released.

As for me, while I was in Hawaii the other week, I took the opportunity to meet up with my old friend, David, who reminded me of the week to end all week 25 years ago.

I first met David at a Tokyo karate dojo in 1974 when he was 16 and his dad was the Associated Press Bureau Chief.

As we were about the same size, Higaona Sensei paired is off as sparing partners. But to fight, David had to take off his glasses. It wasn’t long before I saw my front teeth flying across the room and skittering across the teak floorboards.

I next met David at Morgan Stanley when I was a London director, and he was a junior trader in Tokyo. After that, I took off to start my own hedge fund.

When Morgan ordered him to meet with their traders in Zurich, Switzerland, I saw the perfect excuse for an adventure. Starting in London, we first dropped off our wives for a week of shopping in Paris, flying my twin Cessna 340.

I used my old trick of getting permission to fly over the center of Paris so I could waggle my wings at the tourists as we passed the top of the Eiffel Tower.

In Zurich, I got in a fight with the tower because they ordered me into a parking stand that was still under construction. I left David to his meetings, thus enabling us to bill the entire trip to Morgan Stanley, aviation fuel, five-star hotels, three-star restaurants, and all. If you did that today at (MS) you’d probably get fired.

I then flew off to pick up a couple of cases of first-growth French wines from the owners in Bordeaux to kill time.

When I picked up David the next day, we headed south. It was a clear day, so I thought it might be a good time to visit the Matterhorn summit. As we circled, the day’s successful climbers waved their ice axes. Then it was up the Rhone River Valley, threading an Alpine valley.

When I realized that I couldn’t climb fast enough to escape the valley, I executed a quick Immelman turn. You’re never supposed to do this in a twin because there is a risk of entering a flat spin (watch the Top Gun movie to see what this is).

But I had my British Aerobatics license, my Swiss Alpine license, plenty of speed, and an oversupply of confidence, so I figured we’d be OK. I performed the first half of a loop, then at the top, I flipped the plane 180 degrees, thus righting it and heading in the opposite direction. But I think we singed the rear ends of a few mountain goats on the way.

Needless to say, this caught David’s attention.

When I popped out of the top of the Alps, I was immediately intercepted by a Mirage fighter from the Swiss Air Force. I was now in military air space. He took a few runs at me at just under Mach 1, using me for target practice. Once I was identified he went on off his merry way.

Now I was lost.

All the maneuvering put me too low to intercept any European navigational aids. So we just looked out the window. Eventually, we noticed that to roof tiles of the city below us were red, which meant we had to be over Italy. I correctly identified it as Bolzano. From there I calculated a direct track to the airfield at St. Moritz in Switzerland.

We stayed at the legendary Badrutt’s Palace Hotel. The next day, we took a cable car to the highest peak. While American ski resorts offer cheeseburgers or pizza, Swiss ones have Michelin Three Star Restaurants. We enjoyed the meal of a lifetime.

When the Tokyo stock market crashed, Morgan Stanley let go of most of its Tokyo staff. David landed on his feet, taking over as the head of trading at Lehman Brothers. He later moved on to a hedge fund, cashing in its Lehman stock well before he went under.

David later retired to the North Share of Oahu in Hawaii, and I visit whenever I’m in town. He is very proud of his tropical fruit orchard. When the 50-foot waves crash at nearby Waimea Bay, the ground shakes.

Whenever I see David, he reminds me of our “lost week” over the Alps. It was the most exciting week of his life. And I always respond, “But David, every week is like that for me.”

When I visit Bolzano this summer to research the battles there in WWI in which my great uncle perished, I’ll ask the residents if they noticed a lost airplane overhead 25 years ago.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

The First Marine Division in the Melbourne Cricket Ground in 1942

Higaona Sensei in 1974

Badrutt’s Palace Hotel in St. Moritz

Refueling my Cessna 340 in 1988

February 27, 2023

Tech Letter

Mad Hedge Technology Letter
February 27, 2023
Fiat Lux

Featured Trade:

(THE UNBEATABLE PARTNERSHIP)
(EMR), (GRMN), (AMBA), (NVDA), (DXCM), (CSCO), (INTC), (QCOM)

The Unbeatable Partnership

Tech Letter

Let me introduce to you one of the hottest trends in tech.

They have been on the tip of everyone's lips for years, and that might be an understatement, but the interaction of the internet of things (IoT) and artificial intelligence (AI) offers companies a wide range of advantages.

In order to get the most out of IoT systems and to be able to interpret data, the symbiosis with AI is almost a must.

If the Internet of Things is merged with data analysis based on artificial intelligence, this is referred to as AIoT.

Moving forward, expect this to be the hot new phrase in an industry backdrop where investors love these hot catchphrases and monikers.

What is this used for?

Lower operating costs, shorter response times through automated processes, and helpful insights for business development are just a few of the notable advantages of the Internet of Things.

AI also offers a variety of business benefits: it reduces errors, automates tasks, and supports relevant business decisions. Machine learning as a sub-area of AI also ensures that models – such as neural networks – are adapted to data. Based on the models, predictions and decisions can be made. For example, if sensors deliver new data, they can be integrated into the existing modules.

The Statista research institute assumes that there will be 75 billion networked devices by 2025.

This is exactly where AI comes into play, which generates predictions based on the sensor values received.

However, many companies are still unable to properly benefit from the potential of connecting IoT and AI, or AIoT for short.

They are often skeptical about outsourcing their data - especially in terms of security and communication.

In part because the increased number of networked devices, which requires the connection of IoT and AI, increases the security requirements for infrastructure and communication structure enormously.

It is not surprising that companies are unsettled: Industrial infrastructures have grown historically due to constantly increasing requirements and present companies with completely new challenges, which manifest themselves, for example, in an increasing number of networked devices. With the combination of IoT and AI, many companies are venturing into relatively new territory.

By connecting IoT and AI, a continuous cycle of data collection and analysis is developing.

But companies can no longer deny the advantages of AIoT because this technical combination makes networked devices and objects even more useful.

Based on the insights generated by the models, those responsible can make decisions more easily and reliably predict future events. In this way, a continuous cycle of data collection and analysis develops. With predictive maintenance, for example, production companies can forecast device failures and thus prevent them.

The combination of the two technologies also makes sense from the safety point of view: continuous monitoring and pattern recognition help to identify failure probabilities and possible malfunctions at an early stage – potential gateways can thus be better identified and closed in good time.

The result: companies optimize their processes, avoid costly machine failures, and at the same time reduce maintenance costs and thus increase their operational efficiency.

In this way, IoT and AI represent a profitable fusion: While AI increases the benefit of existing IoT solutions, AI needs IoT data in order to be able to draw any conclusions at all.

AIoT is therefore a real gain for companies of all sizes. They thus optimize processes, are less prone to errors, improve their products and thus ensure their competitiveness in the long term.

Some hardware, software, and semiconductor stocks that will offer exposure into AIoT are Emerson Electric Co. (EMR), Garmin (GRMN), Ambarella (AMBA), Nvidia (NVDA), DexCom (DXCM), Cisco (CSCO), Intel (INTC), and Qualcomm (QCOM).

February 27, 2023

Diary, Newsletter, Summary

Global Market Comments
February 27, 2023
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or MAKING A SILK PURSE FROM A SOW’S EAR)
(META), (GOOGL), (MSFT), (AAPL), (AMZN), (NFLX), (TSLA), (SPY), (TLT), (ENPH), (UUP), (GLD), (SLV), (EEM)

CLICK HERE to download today's position sheet.

February 24, 2023

Diary, Newsletter, Summary

Global Market Comments
February 24, 2023
Fiat Lux

Featured Trade:

(FEBRUARY 22 BIWEEKLY STRATEGY WEBINAR Q&A)
(SPY), (BA), (CCI), (HD), (TLT), (TSLA), (PPLT), (PALL),
(JPM), (NVDA), (AAPL), (GOOGL), (META), (AMZN)

CLICK HERE to download today's position sheet.

February 22 Biweekly Strategy Webinar Q&A

Diary, Free Research, Newsletter

Below please find the subscribers’ Q&A for the February 22 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: Will Russia use nuclear weapons on Ukraine?

A: No, they won’t. If you’re trying to take over a country, you don’t exactly want to drop atomic bombs on it first and render it useless. If they do, Ukraine will retaliate in kind with the nukes they have. Most of the nuclear weapons the old Soviet Union had were assembled in Ukraine and the machinery is still there. We know Ukraine has four nuclear power plants and hundreds of tons of fuel so they have uranium. You only need to increase the purity from 80% to 93% and then convert it to plutonium to get weapons-grade and you only need 20 pounds to make a small bomb. At the very least, they could build a dirty truck bomb and make Moscow uninhabitable for 100 years. If the Russians did explode a nuke, the fallout cloud would blow back on them the next day, China in three days, the US in 10 days, and back on Russia again in two weeks. If Ukraine doesn’t remember how to make nuclear weapons, they can just ask me. I do have “Nuclear Test Site” on my resume.

Q: What would be the impact on the markets of a government debt default?

A: Bonds would collapse, causing interest rates to spike, and taking down stocks big time. Higher interest rates would crash the real estate market. You also can’t do real estate closings during a shutdown because Fannie Mae and Freddie Mac aren’t there to buy the debt. Commodities would fall sharply on recession fears. Even gold and silver do poorly on a massive liquidity squeeze. Government payments would cease, including Social Security, Medicare, and military salaries. Air traffic control would stop unless they are happy to work for free. The only place to hide is cash under your mattress since US Treasury bills and commercial banks will also be at risk. This is what the House Republicans are risking. It really depends on how long the shutdown lasts. Every time Georgia representative Marjorie Taylor Greene shouted “liar” at the State of the Union address you could see bond prices ticking down. She is one of the people who has to agree to a rise in the debt ceiling and she didn’t inspire a lot of confidence in bondholders. All that said, a $10 dip is a good place to buy the (TLT).

Q: Would you buy Boeing up here?

A: I loved Boeing at $100 and we did a could trades down there. At $220 not so much. It’s more than doubled off the October low and all the best-case scenarios have happened. The 737 MAX, which crashed twice due to an AI issue, got back in the air. The 787 Dreamliner is selling well. The company now has a two-year order backlog. And Air India followed up with the biggest aircraft order in history, some 450 planes over ten years. If Boeing dips $50 that would be another story because I think it hits a new all-time high at $450 in a couple of years. By the way, I took a 737 MAX on my flight back from Hawaii last weekend and the crew loved it. There are no screens on the seats. Instead, they broadcast the 800 greatest movies of all time on free WIFI.

Q: How do we know if your trade alert is for the stock, the ETF, or another underlying position?

A: Look at the ticker symbol—it always tells you exactly which security we are working in.

Q: With Bullard signaling a 50 basis-point rate hike, will the S&P (SPY) go down in the near term and how much?

A: Well Bullard is only one guy out of nine, so he doesn’t have the final say. It really depends on what Jay Powell wants. And if the data continues hot and inflation keeps rising, we will get a 50 basis point rise, and that should take the index down 10% from the recent high, or give up half of its recent year-to-date gains, so that’s a good rule of thumb. As long as we’re waiting for bad news, (which we won’t get until March 22) the markets will do nothing until then.

Q: What do you think about Crown Castle International (CCI), the cell tower company, taking a big hit with the bond market?

A: It pretty much moves in sync with the bond market, which has just dropped 10 points, so you probably want to be buying or doubling up on (CCI) right here, because it will be the first thing to recover once we see a negotiated increase in the debt ceiling which has to happen before the summer. The 5G buildout continues unabated.

Q: Would you recommend buying Tesla (TSLA) shares again?

A: Yes, but at least $50 lower, which we may get. Or at least $50 off the $217 top. I think Tesla goes to $1,000 sometime in the next couple of years and so does Elon Musk. All of the factors that could drive the stock that high are in progress. I know it’s happening over there, and that’s easily a $1,000 stock once their current breakthroughs go mass-market.

Q: Any interest in Iron Condors?

A: It is the same as Strangles, with more limited risk with four legs, a call spread and a put spread because you stop out your losses at much lower levels. But they are very trading-intensive, commission-intensive trades, and it’s really too much for most beginners to handle. However, if you’re a professional, you might consider doing iron condors on these positions. Iron Condors also max profits when nothing moves, and lately, no move is a pretty rare event. We’re going to get it for the next couple of months, but don’t count on that being a frequent trade.

Q: Any iShares 20 Plus Year Treasury Bond ETF (TLT) LEAPS to buy now?

A: Yes I've been kind of sitting on my hands waiting to see if this bottom here holds at 99 before I put out LEAPS, but we’re so close it really almost makes no difference. And if I were to do a LEAPS here it probably would be the $100-$105 one-year out. That might get you about a 100% profit in a year. That’s a very safe LEAPS, and I’ll get the numbers out when I get a chance.

Q: What’s your opinion on Home Depot (HD)?

A: I like it for the long term. Clearly, their disastrous earnings report shows that the economy for home repair is not as strong as we thought it was, so it may go lower first. I would hold off until we get a real capitulation selloff in those stocks.

Q: Are gold and silver possible candidates for LEAPS?

A: Yes, especially in view of the recent correction in these metals. And we did put these out last October at the market bottom. I probably will be updating that sometime in the next few weeks.

Q: How much longer will the Ukraine/Russia war last?

A: The general consensus among the military now is that this goes on for several more years, and both sides will just keep pouring troops into the meat grinder until they get exhausted.

Q: Any way to play Platinum (PPLT) or Palladium (PALL)?

A: Yes, there are ETFs on each of them.

Q: Any thoughts on the crypto industry?

A: I have given up on the crypto industry because it has been shown that so many of these trading platforms were stealing from their customers. Once you lose the confidence of a customer on trust, you never get it back in the financial industry. Also, crypto was interesting a couple of years ago when it was going up and everything else in the world was too expensive, but now you have all the best stocks trading not far from multi-year lows, and that makes quality stocks much more attractive than a crypto where you really don't know what’s going to happen. Crypto could be another Nikkei, which after 32 years still hasn’t reached its old highs. That is unless it gets taken over by big banks like (JPM) and regains respectability that way.

Q: Any thoughts on investing in the AI trend?

A: AI has suddenly become what crypto was 2 years ago, and what 3D printing was 15 years ago. It’s just the theme of the day, and something to promote. There are no pure AI plays. Basically, all companies have been using it for 10 or 15 years, it’s not a new thing. In fact, AI is already in every aspect of your life, you just might not know it yet. NVIDIA (NVDA) is probably the purest AI play out there whose chips everyone needs to execute AI. Beyond that, the biggest AI users are Apple (AAPL), Alphabet (GOOGL), Meta (META), and Amazon (AMZN). When Amazon makes ten more recommendations on books you might like or movies you might watch, that is AI.

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

With Medal of Honor Winner Colonel Mitchel Paige

February 1, 2023

Tech Letter

Mad Hedge Technology Letter
February 1, 2023
Fiat Lux

Featured Trade:

(5 STOCKS FOR THE UPCOMING A.I. BOOM)
(NVDA), (AMBA), (MBLY), (AI), (AYX)

5 Stocks For The Upcoming A.I. Boom

Tech Letter

There has been non-stop talk about how ChatGPT is reimagining the tech sector.

The highest quality artificial intelligence chatbot to ever grace the earth is scaring tech executives around the world.

My personal discussions with people in the know are that every tech company is now forming a work group and assembling its best engineers to figure out how to get their hands on something similar.

That being said, here are five companies that will benefit asymmetrically as this chatbot tech goes from fringe to mainstream.

Buckle up with your cowboy hat because this type of technology will become pervasive in no time.

Since the cutting-edge chatbot was launched, there has been a massive re-rating of A.I. stocks because of the legitimacy of the technology.

It definitely appears that chatbot AI will finally live up to the hype.

On November 30th, OpenAI Chat introduced GPT and has since shown that the software can be used in everything from writing stock reports to resignation emails to messages for dating apps

Nvidia (NVDA), famously known for designing and manufacturing graphics chips, is the first stock that goes off the top of my head to benefit from this new AI craze.

The company's technology is being used for various AI integrations from self-driving cars to robots.

Nvidia's CEO Jensen Huang is one of the better leaders in Silicon Valley.

Recent forecasts estimate that a boom in Chat GPT usage could bring Nvidia revenue of between $3 billion and $11 billion over the next 12 months.

Success of Chat GPT brings Nvidia a potentially significant boost in demand for computing power.

New Nvidia chips are benefiting from the large computing requirements of AI tools such as ChatGPT.

Ambarella (AMBA) is another chip company powering the AI market. It develops semiconductors used in everything from in-car entertainment consoles to cell phones.

AMBA chips are also specifically used in self-driving cars, and the company recently partnered with German auto parts maker Continental for a joint autonomous driving project.

Mobileye (MBLY) was spun off from Intel and focuses on autonomous driving technology and driver assistance systems, which include chips and cameras. Volkswagen, Ford, and GM are among the company's customers.

Mobileye SuperVision is the top AI product at MBLY and is the most advanced driver-assist system on the market, providing “hands-off” navigation capabilities of an autonomous vehicle and designed to handle standard driving functions on various road types, while still always requiring the driver's full attention and eyes on the road.

C3.ai (AI) is a provider of software solutions in the field of artificial intelligence and owes its recent share price increase to the success of Chat GPT. Upon the announcement alone, shares rose about 28% when it was announced that Chat GPT would be integrated into its product range.

Alteryx software (AYX) is best known for data and analytics. The company is also involved in automation and specializes in artificial intelligence integration, albeit to a much lesser extent than competitors like Google and Meta.

There are rosy days ahead for AI stocks that will attach their fortunes to one of the most important trends in Silicon Valley.

Tag Archive for: (NVDA)