Mad Hedge Technology Letter
November 19, 2021
Fiat Lux
Featured Trade:
(THE TECH FIRM RESPONSIBLE FOR THE METAVERSE AVATAR)
(NVDA)
Tag Archive for: (NVDA)
Nvidia (NVDA) is one of those tech companies you elevate to the top pantheon of tech companies and readers can’t take a glimpse into the future just by getting to know the chip company better.
Bluntly speaking, it’s a can’t miss tech company that every reader should have as part of their portfolio.
How are they part of the avant-garde of tech?
They are flagbearers of accelerated computing and will contribute part of the groundwork upon which the metaverse and its future business opportunities will be constructed upon.
Sounds sexy, right?
Nvidia deals in chips — chips are enablers, but chips don't create markets, software creates market.
At this point, accelerated computing is very different than general-purpose computing, it’s just at another level with the amount of data these need to be processed and the functionality of it.
Artificial intelligence, robotics, and most of the cutting-edge applications in the world need support from accelerated computing because GPUs run out of steam and that people are saying that not because it's not true, it is abundantly clear that the amount of instruction in parallel that you can squeeze out of a system is although not zero, is incredibly hard.
Accelerated computing delivers great benefits and does not require a lot of work and yet the work basically says for every domain, for every application — to have a whole stack.
What is a stack?
A stack is a linear data structure that follows a particular order in which the operations are performed.
And so whenever you want to open a new market by accelerating those applications or that domain of applications, you have to come up with a new stack, and the new stack is hard because you have to understand the application, you have to understand the algorithms, the mathematics, you have to understand computer science to distribute it across, to take something that was single-threaded and make it multi-threaded and make something that computer specialists have done sequentially and make it process in parallel.
You break everything, you break storage, you break networking, you break everything.
And so it takes a fair amount of expertise and that's why over the course of 30 years Nvidia has become a full-stack company because they solve complex problems consistently practically through decades basically integrating and connecting all that needs to be connected in a fluid type of way.
The ultimate benefit, once you have the ability, then you can open new markets and Nvidia has played a really large role in democratizing artificial intelligence and making it possible for anybody to be able to do it.
Democratized scientific computing is one of Nvidia’s biggest achievements so that researchers and scientists, computer scientists, data scientists, scientists of all kinds can get access to this incredibly powerful tool that we call computers to do advanced research.
This brilliant, advanced computing is thrusting Nvidia to the forefront of the metaverse where they have been working on perfecting the technology to populate a high-quality 3D avatar.
They call this business division the Omniverse and it took half a decade to start building Omniverse, but its largely built on a quarter century of work.
Nvidia is developing an AI to be able to speak in a human way so that people feel more comfortable and more engaged with the AI.
They are being built in pieces and will be integrated to create what is called Omniverse Avatar.
How quickly will they deploy this?
I believe Omniverse Avatar will be in drive-throughs and restaurants, fast food restaurants, check out with restaurants, in retail stores, all over the world within less than five years.
And we're going to need it in all kinds of different applications because there is such a great shortage of labor and there is such a wonderful way that you can now engage with a 3D Avatar.
This 3D avatar doesn't get tired and it's always on and it will certainly be cloud-native.
This revenue and growth essentially are generated by accelerated computing and is a full-stack challenge.
So I am not focusing on the 50% quarterly revenue growth or the 83% in quarterly EPS growth, because that will all fall into place naturally if they keep their lead in accelerated computing refining their full-stack capabilities.
It takes software to open new markets. Chips can't open new markets. If you build another chip, you can steal somebody's share, but you can't open a new market and it takes software to open new markets.
Lastly, the Omniverse opportunity is a great opportunity for Nvidia who could be responsible for creating the avatars in the metaverse.
They are ostensibly one of the foundational companies of the Metaverse.
Nvidia are one of our favorite tech companies at the Mad Hedge Technology Letter.
Global Market Comments
November 19, 2021
Fiat Lux
Featured Trade:
(NOVEMBER 17 BIWEEKLY STRATEGY WEBINAR Q&A),
(RIVN), (WMT), (BAC), (MS), (GS), (GLD), (SLV), (CRSP), (NVDA),
(BAC), (CAT), (DE), (PTON), (FXI), (TSLA), (CPER), (Z)
Below please find subscribers’ Q&A for the November 17 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.
Q: Even though your trading indicator is over 80, do you think that investors should be 100% long stocks using the barbell names?
A: Yes, in a hyper-liquidity type market like we have now, we can spend months in sell territory before the indexes finally rollover. That happened last year and it’s happening now. So, we can chop in this sort of 50-85 range probably well into next year before we get any sell signals. Selling apparently is something you just do anymore; if things go down, you just buy more. It’s basically the Bitcoin strategy these days.
Q: What do you think about Rivian's (RIVN) future?
A: Well, with Amazon behind them, it was guaranteed to be a success. However, we mere mortals won't be able to buy any cars until 2024, and they have yet to prove themselves on mass production. Moreover, the stock is ridiculously expensive—even more than Tesla was in its most expensive days. And it’s not offering any great value, just momentum so I don’t want to chase it right here. I knew it was going to blow up to the upside when the IPO hit because the EV sector is just so hot and EVs are taking over the global economy. I will watch from a distance unless we get a sudden 40% drawdown which used to happen with Tesla all the time in the early days.
Q: Are you worried about another COVID wave?
A: No, because any new virus that appears on the scene is now attacking a population that is 80-90% immune. Most people got immunity through shots, and the last 10% got immunity by getting the disease. So, it’s a much more difficult population for a new virus to infect, which means no more stock market problems resulting from the pandemic.
Q: Is investing in retail or Walmart (WMT) the best way to protect myself from inflation?
A: It’s actually quite a good way because Walmart has unlimited ability to raise prices, which goes straight through to the share price and increases profit margins. Their core blue-collar customers are now getting the biggest wage hikes in their lives, so disposable income is rocketing. And really, overall, the best way to protect yourself from inflation is to own your own home, which 62% of you do, and to own stocks, which 100% of the people in this webinar do. So, you are inflation-protected up the wazoo coming to Mad Hedge Fund Trader. Not to mention we buy inflation plays like banks here.
Q: Why are financials great, like Bank of America (BAC)?
A: Because the more their assets increase in value, the greater the management fees they get to collect. So, it’s a perfect double hockey stick increase in profits.
*Interest rates are rising
*Rising interest rates increase bank profit margins
*A recovering economy means default rates are collapsing
*Thanks to Dodd-Frank, banks are overcapitalized
*Banks shares are cheap relative to other stocks
*The bank sector has underperformed for a decade
*With rates rising value stocks like banks make the perfect rotation play out of technology stocks.
*Cryptocurrencies will create opportunities for the best-run banks.
Q: Do you think the market is in a state of irrational exuberance?
A: Yes. Warning: irrational exuberance could last for 5 years. That’s what happened when Alan Greenspan, the Fed governor in 1996, coined that phrase and tech stocks went straight up all the way up until 2000. We made fortunes off of it because what happens with irrational exuberance is that it becomes more irrational, and we’re seeing that today with a lot of these overdone stock prices.
Q: Should I hold cash or bonds if you had to choose one?
A: Cash. Bonds have a terrible risk/reward right now. You’re getting like a 1% coupon in the face of inflation that's at 6.2%. It’s like the worst mismatch in history. In fact, we made $8 points on our bond shorts just in the last week. So just keep selling those rallies, never own any bonds at all—I don’t care what your financial advisor tells you, these are worthless pieces of paper that are about to become certificates of confiscation like they did back in the 80s when we had high inflation.
Q: What’s your yearend target for Nvidia (NVDA)?
A: Up. It’s one of the best companies in the world. It’s the next trillion dollar company, but as for the exact day and time of when it hits these upside targets, I have no idea. We’ve been recommending Nvidia since it was $50, and it’s now approaching $400. So that’s another mad hedge 20 bagger setting up.
Q: What about CRISPR Therapeutics (CRSP)?
A: The call spread is looking like a complete write-off; we missed the chance to sell it at $170, it’s now at $88. So, I’m just going to write that one-off. Next time a biotech of mine has a giant one-day spike, I am selling. What you might do though with Crisper is convert your call spread to straight outright calls; that increases your delta on the position from 10% to 40% so that way you only need to get a $20 move up in the stock price and you’ll get a break-even point on your long position. So, convert the spreads to longs—that’s a good way of getting out of failed spreads. You do not need a downside hedge anymore, and you’ll find those deep out of the money calls for pennies on the dollar. That is the smart thing to do, however, you have to put money into the position if you’re going to do that.
Q: Would you buy a LEAP in Tesla (TSLA) at this time?
A: No, it’s starting a multi-month topping out process, then it goes to sleep for 5 months. After it’s been asleep for 5 months then I go back and look at LEAPS. Remember, we had a 45% drawdown last year. I bet we get that again next year.
Q: Will inflation subside?
A: Probably in a year or so. A lot depends on how quickly we can break up the log jam at the ports, and how this infrastructure spending plays out. But if we do end the pandemic, a lot of people who were afraid of working because of the virus (that’s 5 or 10 million people) will come back and that will end at least wage inflation.
Q: When is the next Mad Hedge Fund Trader Summit?
A: December 7, 8, and 9; and we have 27 speakers lined up for you. We’ll start emailing probably next week about that.
Q: Are gold (GLD) and silver (SLV) getting close to a buy?
A: Maybe, unless Bitcoin comes and steals their thunder again. It has been the worst-performing asset this year. The only gold I have now is in my teeth.
Q: Morgan Stanley (MS) is tanking today, should I dump the call spread?
A: I’m going to see if we hold here and can close above our maximum strike price of $98 on Friday. But all of the financials are weak today, it’s nothing specific to Morgan Stanley. Let’s see if we get another bounce back to expiration.
Q: Where can I view all the current positions?
A: We have all of our positions in the trade alert service in your account file, and you should find a spreadsheet with all the current positions marked to market every day.
Q: What is the barbell strategy?
A: Half your money is in big tech and the other half is in financials and other domestic recovery plays. That way you always have something that’s going up.
Q: Is Elon Musk selling everything to avoid taxes from Nancy Pelosi?
A: Actually, he’s selling everything to avoid taxes from California governor Gavin Newsom—it’s the California taxes that he has to pay the bill on, and that’s why he has moved to Texas. As far as I know, you have to pay taxes no matter who is president.
Q: Will the price of oil hit $100?
A: I doubt it. How high can it go before it returns to zero?
Q: Is it time to buy a Caterpillar (CAT) LEAP?
A: We’re getting very close because guess what? We just got another $1.2 billion to spend on infrastructure. Not a single job happens here without a Caterpillar tractor or a tractor from Komatsu for John Deere (DE).
Q: Will small caps do well in 2022?
A: Yes, this is the point in the economic cycle where small caps start to outperform big caps. So, I'd be buying the iShares Russell 2000 ETF (IWM) on dips. That's because smaller, more leveraged companies do better in healthy economies than large ones.
Q: Is it too late to buy coal?
A: Yes, it’s up 10 times. The next big move for coal is going to be down.
Q: Peloton (PTON) is down 300%; should I buy here?
A: Turns out it’s just a clothes rack, after all, it isn't a software company. I didn’t like the Peloton story from the start—of course, I go outside and hike on real mountains rather than on machines, so I’m biased—but it has “busted story” written all over it, so don’t touch Peloton.
Q: Will spiking gasoline prices cause US local governments to finally invest in Subways and Trams like European cities, or is this something that will never happen?
A: This will never happen, except in green states like New York and California. A lot of the big transit systems were built when labor was 10 cents a day by poor Irish and Italian immigrants—those could never be built again, these massive 100-mile subway systems through solid rock. So if you want to ride decent public transportation, go to Europe. Unfortunately, that’s the path the United States never took, and to change that now would be incredibly expensive and time-consuming. They’re talking about building a second BART tunnel under the bay bridge; that’s a $20 billion, 20-year job, these are huge projects. And for the last five years, we’ve had no infrastructure spending at all, just lots of talk.
Q: Would Tesla (TSLA) remains stable if something happened to Elon Musk?
A: Probably not; that would be a nice opportunity for another 45% correction. But if that happened, it would also be a great opportunity for another Tesla LEAPS. My long-term target for the stock is $10,000. Elon actually spends almost no time with Tesla now, it’s basically on autopilot. All his time is going into SpaceX now, which he has a lot more fun with, and which is actually still a private company, so he isn’t restricted with comments about space like he is with comments about Tesla. When you're the richest man in the world you pretty much get to do anything you want as long as you're not subject to regulation by the SEC.
Q: How realistic is it that holiday gatherings will trigger a huge wave of COVID in the United States forcing another lockdown and the Fed to delay a rise in interest rates?
A: I would say there’s a 0% chance of that happening. As I explained earlier, with 90% immunity in much of the country, viruses have a much harder time attacking the population with a new variant. The pandemic is in the process of leaving the stock market, and all I can say is good riddance.
Q: What about the Biden meeting with President Xi and Chinese stocks (FXI)?
A: It’s actually a very positive development; this could be the beginning of the end of the cold war with China and China’s war on capitalism. If that’s true, Chinese stocks are the bargain of the century. However, we’ve had several false green lights already this year, and with stuff like Microsoft (MSFT) rocketing the way it is, I’d rather go for the low-risk high-return trades over the high-risk, high return trades.
Q: What’s your opinion of Zillow (Z)?
A: I actually kind of like it long term, despite their recent disaster and exit from the home-flipping business.
Q: Do you like copper (CPER) for the long term?
A: Yes, because every electric car needs 200 lbs. of copper, and if you’re going from a million units a year to 25 million units a year, that’s a heck of a lot of copper—like three times the total world production right now.
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 ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
An Old Fashioned Peloton (a Mountain)
Global Market Comments
October 8, 2021
Fiat Lux
Featured Trade:
(OCTOBER 6 BIWEEKLY STRATEGY WEBINAR Q&A),
(FCX), (TSLA), (BLK), (MS), (JPM), ($NATGAS), (UNG), (BIDU), (MRNA), (COIN), (ROM), ($BTCUSD), (ETHE), (FB), (DAL), (ALK), (LUV) (MSTR), (BLOK), (V), (NVDA), (SLV), (TLT), (TBT)
Below please find subscribers’ Q&A for the October 6 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.
Q: When will Freeport McMoRan (FCX) go up?
A: When the China real estate crisis ends, and they start buying copper again to build new apartment buildings.
Q: Do rising interest rates imply trouble for tech?
A: Yes, they do, but only for the short term. Long term, these things all double on a three-year view; and the next rise up in tech stocks will start when interest rates peak out, probably with 10-year yields at 1.76% or 2.00%. The great irony here is that all the big techs profit from higher rates because they have such enormous cash flows and balances. But that is just how markets work.
Q: I know you’ve been promoting Tesla (TSLA) for a very long time. What do you think about it here?
A: We’ve just gone from $550 to over $800. It actually has been one of the best performing stocks in the market for the past four months. Short term, you want to take profits; long term you want to hold it because it could go up 10 times from the current level. They just broke all their sales records and are the fastest growing car company in the US or Europe.
Q: If Blackrock (BLK) is reliant on interest rates, will the rise in interest rates hurt them?
A: No, it’s the opposite. Rising interest rates are positive for Blackrock because it improves the return on their investments, which they get a piece of; so rising interest rates mean more money and more fees. That's why I own it— it is a rising interest rate play, not a falling interest rate play.
Q: What do you think about Baidu (BIDU)?
A: Stay away from all China trades right now, it’s uninvestable. Not only do I not know what the Chinese are going to do next—they seem to be attacking a new industry every week—but the Chinese don’t even seem to know. This is all new to them; they had been embracing the capitalist model for the last 40 years and they now seem to be backtracking. There are better fish to fry, like Morgan Stanley (MS) and JP Morgan (JPM).
Q: Don’t you have a bear put spread on Baidu (BIDU)?
A: We did have a bear put spread on Baidu, but that's only a very short term, front month trade. It does look like it’s going to make money; but keep in mind those are high-risk trades.
Q: Could Natural Gas (UNG) trigger an economic crisis?
A: Not really. In the US, natgas is only a portion of our total energy needs, about 34%, and that’s mostly in the Midwest and California. The US has something like a 200-year supply with fracking. Plus, we’re on a price spike here—we’ve gone from $2 to $20/btu in Europe, entirely manipulated by Russia trying to get more money on their exports and more political control over Europe. So, it’s a short-term deal, and you can bet a lot of pros are out there shorting natgas like crazy right here. The real issue here is that no one wants to invest in carbon-based energy anymore and that is creating bottlenecks in the energy supply chain.
Q: How long will it take to provide EV infrastructure to mass gas station availability?
A: The EV infrastructure has in fact been in progress for 20 years, if you count the first generation of EV in the late 90s, which bombed. Tesla has been building power stations in the US for 10 years. They have 10,000 chargers now in 1,800 stations and their goal is 20,000 charging stations. In fact, most people already have the infrastructure for EV charging—you just charge them at home overnight, like I do. The only time I ever need a charge is when I go to Lake Tahoe. For gasoline engines, on the other hand, it took 20 years to build infrastructure from 1900 to 1920 to replace horses. Believe it or not, gasoline cars were the great environmental advance of the day, because it meant you could get rid of all the horses. New York City used to have 150,000 horses, and the city was constantly struggling through streets of two-foot-deep manure piles. So that was the big improvement. It only took 100 years to take the next step.
Q: The latest commodity with supply constraints I hear about is cotton. Is this all just a temporary thing and can we expect supply capacity to be back to normal next year? Is this just the failing of a just-in-time model that simply doesn’t work in the age of deglobalization?
A: We are losing possibly one third of our current economic growth due to part shortages, labor shortages, supply chain problems—those all go away next year, and that one third of economic growth just gets postponed into 2022 which means that the economic recovery is extended over a longer period of time, and so is the bull market in stocks, how about that! That’s why I’m loading the boat right here. It’s the first time I've been 100% invested since May.
Q: What do you think about the airlines here?
A: High risk, but high return play for the next year. Delta (DAL) is a play on business travel recovery. Alaska Airlines (ALK) and Southwest(LUV) are a play on a vacation travel return flying return, which has already started—we’re back to pre-pandemic TSA clearances at airports.
Q: Is Facebook (FB) a buy now?
A: No, I want to wait for the dust to settle before I go back in. I think it does recover and go to new highs eventually but will go to lower lows first. Regulation is certainly coming but we don’t know what.
Q: When will the chip shortage end?
A: Two years. My prediction is much longer than anybody else's because people are designing chips into new products like crazy. All predictions for the chip shortage to end in only a year don’t take that into account.
Q: When do we go into the (ROM) ProShares Ultra Technology long play?
A: When interest rates peak out sometime early next year. It’s probably a great entry point for tech; until then they go nowhere.
Q: Does the appetite for financials extend to Canada and their banks with higher dividends?
A: Yes, US and Canadian interest rates tend to move fairly closely so that rising rates here should be just as good for banks in Canada, and you might even be able to get them cheaper.
Q: Do you suggest we buy Altcoin?
A: No, not unless you're a Bitcoin professional like a miner, who can differentiate between all the different Altcoins. You can buy up to 100 different Altcoins on the main exchanges like Coinbase (COIN). In the crypto business, there is safety and size; that means Bitcoin ($BTCUSD) and Ethereum (ETHE), which between them account for about three quarters of all the crypto ever issued. A Lot of the smaller ones have a risk of going to zero overnight, and that has already happened many times. So go with the size—they’re less volatile but they’ll still go up in a rising market. And you should subscribe to our bitcoin letter just to get the details on how that market works.
Q: Target for Bitcoin by Christmas?
A: My conservative target is $66,000, but if we really go nuts, we could go as high as $100,000. That’s the “laser eyes” target for a lot of the early investors.
Q: Suggestions for a Crypto ETF?
A: It’s not out yet but will be shortly. I think that Crypto will run like crazy in anticipation of the Bitcoin ETF that we don’t have yet.
Q: Should I buy Moderna (MRNA) on this dip at 320 down from 400, or is this a COVID revenue flash in the pan that won’t come back?
A: It’ll come back because they’re taking their COVID technology and applying it to all other human diseases including cancer, which is why we got in this thing two years ago. But we may have to find a lower low first. So I would wait on all the drug/biotech plays which right now are getting hammered with the demise of the delta virus.
Q: What’s your favorite ETF right now?
A: Probably the (TBT) Double Short Treasury ETF. I’m looking for it to go up another 30% from here to 24 or 25 by sometime next year.
Q: EVs have been hot this year; Lordstown Motors is down to only $5 from $27 and just got downgraded by an analyst to $2. Should I buy, or is this a dangerous strategy?
A: I would say highly dangerous. This company has been signaling that it’s on its way to bankruptcy essentially all year, so don’t confuse “gone down a lot” with being “cheap” because that’s how you buy stuff on the way to zero.
Q: What about Anthony Scaramucci’s ETF?
A: We will have Anthony Scaramucci as a guest in our December summit. And the ETF is a basket of stocks as diverse as MicroStrategy (MSTR), Blok (BLOK), Visa (V), and Nvidia (NVDA), so you will only get a fraction of the Bitcoin volatility. That means if Bitcoin goes up 100% you might get a 40% or 50% move in the actual ETF.
Q: Do you have a Bitcoin book coming out soon?
A: I do, it should be out by the end of this month. That’s The Mad Hedge Guide to Trading Bitcoin, and it will have all the research I’ve accumulated on trading Bitcoin in the past year.
Q: Why have you only issued one trade alert in Bitcoin?
A: You don’t get a lot of entry points for Bitcoin. You buy the periodic bottoms and then you run them. Dollar cost averaging is very useful here because there are no traditional valuation measures to use, like price earnings multiples or price to book. When it comes time to sell, we'll let you know, but there aren’t a lot of Bitcoin plays outside the Bitcoin exchanges.
Q: Thoughts on silver (SLV)?
A: It’s horribly out of favor now and will continue to be so as long as Bitcoin gets the spotlight. Also, there’s a China problem with the precious metals.
Q: There are 8 or 10 good public Bitcoin and Ethereum ETFs in Canada.
A: That’s true, if you’re allowed to trade in Canada.
Q: Can the US ban Bitcoin like China did?
A: No, if they did, it would just move offshore to the Cayman Islands or some other place outside the world of regulation.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log on to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Sightseeing in Laos in 1975
Mad Hedge Technology Letter
August 20, 2021
Fiat Lux
Featured Trade:
(IS NVIDIA WORTH A LONG-TERM INVESTMENT?)
(NVDA), (AMZN), (VMW)
A can’t-miss stock in technology investing has to be Nvidia (NVDA).
We got confirmation from the latest earnings report that they are still too hot to handle.
Sure, the bulk of revenue still mostly comes from gaming, but gaming is still a secular growth driver.
They had another strong quarter overall, with revenue of $6.5 billion and year-on-year growth of 68%.
They set new records for total revenue as well as for Gaming, Data Center, and Professional Visualization.
The pandemic minted a fresh wave of new gamers which has been a generous gift to an already robust company.
The audience for global eSports will soon approach 0.5 billion people, while the number of those who live stream games is expected to reach over 700 million.
Meanwhile, the number of PC gamers helps set the stage for a new audience that will help drive Nvidia’s future products.
Gaming, with revenue of $3.1 billion, was up 11% sequentially and up 85% from a year earlier.
Demand remained exceptionally strong, outpacing supply.
Nvidia has two powerful new GPUs for gamers and creators, the GeForce RTX 3080 Ti and RTX 3070 Ti, delivering 50% faster performance than their prior generation with acclaimed features such as real-time ray tracing, and AI Rendering.
Laptop demand was another blistering division that was again helped by the importance of quality devices in a locked-down world.
From the top-of-the-line gaming laptops to those through mainstream price points as low as $799 that brings the power of GeForce CPUs to gamers, the entire range of products was in high demand.
Highlighting Nvidia’s stranglehold at the cutting edge of technology and the future is its developments in the self-driving sphere.
In autonomous trucking, DRIVE ecosystem partner, Plus, signed a deal with Amazon (AMZN) to provide at least 1,000 self-driving systems to Amazon's fleet of delivery vehicles.
The systems are powered by NVIDIA DRIVE for high performance, energy-efficient and to take advantage of its centralized AI computer.
An autonomous trucking start-up, Embark, is building on NVIDIA DRIVE.
The system is being developed for trucks for four major auto manufacturers representing the vast majority of largest size trucks in the US.
The NVIDIA DRIVE platform is being rapidly adopted across the transportation industry from passenger-owned vehicles to rob taxis, to trucking and delivery vehicles.
The goal is to get Nvidia products in everything that autonomously moves one day, a big goal, but I have seen crazier things come to fruition.
Nvidia expanded AI software and subscription offerings make it easier for enterprises to adopt AI from the initial development stage through to deployment and operations.
The enterprise continues to be a core set of Nvidia’s operations.
In the Enterprise, the application that is driving AI is that every enterprise must move toward being a tech company, take advantage of connected clouds, connected devices, and artificial intelligence to achieve it.
Nvidia just helps facilitate the opportunity to deploy AI services out of the edge.
And in order to do so, there are several things that have to happen; first, they have to create a computing platform that allows them to do training in the IT environment that they understand, which is a virtualized, which is largely managed by VMware (VMW).
And Nvidia’s collaboration with VMware is creating a new type of system that could be integrated into the enterprise that has been quite a significant effort and it's in volume production today.
The second is a server that allows the enterprise customers to deploy their AI models out to the edge.
The AI engine through software suite that they’ve been developing over the last 10 years now has been integrated into this environment and allows the enterprises to basically run AI out of the box.
Putting all of the state-of-the-art AI solvers and engines and libraries that Nvidia has industrialized and refined over the years, are all available to anyone that signs up for an Enterprise license.
The largest eyebrow-raiser in the earnings rhetoric was news from the data center which is expected to have another strong quarter with sequential growth driven largely by “accelerating demand.”
This acceleration has boosted record revenues in both hyperscale cloud and industrial enterprise.
Now we are seeing accelerated growth for the short to midterm.
The acceleration in hyperscale and cloud comes from the transition of the catalyst providers in taking AI applications, which are now heavily deep learning-driven into production.
Ultimately, Nvidia’s gaming division is its cash cow operating at a tremendously high level and the accelerated growth in the data center will help sweeten margins for the foreseeable future.
Gaming demand is continuing to exceed supply and the company expects channel inventories to remain below target levels.
The one controversy that most analysts were waiting for was an update on its acquisition of British chip company Arm Ltd.
Upper management, more or less, offered some vague one-liners expressing “concern” and noting that the deal is “taking longer than initially thought.”
Getting Arm Ltd. onboard to add another monkey branch in its neural network would be a major feather in Nvidia’s cap, but the global regulatory climate has been harsh as of late.
This could be a headwind for future cash flow expectations, yet, ultimately, if there is any weakness in the stock, I would dollar cost average this one out on any 3-5% dip.
Nvidia is highly volatile, and this is not the stock to day trade. Considering we are at new all-time highs of $200, I wouldn’t chase this one higher but wait for the next small dip.
Fortunately, time and time again, Nvidia proves they are at the forefront of tech innovation, powered by a brilliant CEO, and instead of market timing the stock, it should simply be a cornerstone of a long-term buy and hold portfolio.
I am bullish on Nvidia long term with high conviction.
Global Market Comments
August 16, 2021
Fiat Lux9
(MARKET OUTLOOK FOR THE WEEK AHEAD, or MY REVOLUTIONARY NEW STRATEGY,
(SPY), (TLT), (NVDA), (ROKU), (HOOD), (GS), (JPM)
Friday saw the stock market’s lowest volume day of the year, and shares rose almost every day last week to new all-time highs.
The way this usually ends is that the slow grind explodes into a high-volume spike marking an interim market top. That makes new investment now extremely risky.
August usually markets the best buying opportunity of the year with a cataclysmic selloff. Remember the 2010 flash crash, down 1,100 points in two hours? So far, no cigar.
I have tons of people asking me what to buy right now. That is usually another market-topping indicator. I tell them to keep their cash. Cash is a position. A dollar at a market top is worth $10 at a market bottom.
Under an index that is making excruciatingly slow gains are constant sector rotations bring pretty dramatic moves. Play those dramatic moves.
May saw money suddenly shift into tech stocks, with the best, like NVIDIA (NVDA) leaping 56%.
The day the ten-year US Treasury yield (TLT) bottomed at 1.10%, tech went back to sleep. While big tech ground sideways, small tech brought more heart-rending downside moves, such as the 27% plunge in Roku (ROKU).
In the meantime, financials and commodities have moved to the fore. Goldman Sachs (GS) melted up 20% off of blockbuster earnings, while Freeport McMoRan popped 26%, thanks to a Chilean copper union strike.
Let me propose a revolutionary new investment strategy to you. It’s called “buy low, sell high.” Everybody talks about it but actually executes the opposite.
I employ this money-making ploy through my “barbell” strategy, with equal weightings in technology and domestic recovery stocks like financials, industrials, and commodities.
It's quite simple. You just sell whatever has just delivered the most recent spectacular upside gains and roll that money into what has recently become ignored, cheap, and out of favor.
It is a market approach that is really devoid of the thought process.
All eyes will be on Jackson Hole, Wyoming next week, the annual meeting of the world’s top central bankers. That is when we get the next hint about the intentions of the Federal Reserve as to, not "if", but "when" they reduce quantitative easing.
You would think that a 6.5% GDP growth rate and a 5.4% inflation rate would do it, but these days, nothing is certain. A hot jobs report in September would do it for sure.
We may have to wait until then before we see any serious move in stocks and a return of volatility (VIX). In the meantime, catch up on reading your research, pay your bills, and work on your golf swing.
Bitcoin staged a recovery for the ages, rallying 55% in two weeks. The “battle of $30,000” is over and the cryptocurrency won. It really is becoming too big to fail. I might have to do something about that.
July Inflation Read at a hot 5.4%, but core inflation showed a small decline. In June, used car prices accounted for a third of the total price increases, but last month, it was zero. So far, there is no move in rents, but it’s coming. All Fed eyes will remain laser-focused on this number.
Taper talk is back! With the ballistic increase in the July Nonfarm Payroll report and the 2 ½ point dive in the bond market. I think the top is in for finds and the bottom for long term rates. It means tech stocks will lag from now, while interest rate sensitives like banks, brokers, and fund managers will lead. Buy (JPM), (MS), (V), and (GS) on dips.
US Budget Deficit hits a record $302 Billion in July. Covid benefits are remaining high, while tax revenues are lagging YOY. Keep selling those (TLT) rallies. The generational crash may have just begun.
Fed’s Rosengren Says QE is not creating jobs, causing bonds to drop a full point in the after-market. No kidding. I have been arguing that our nation’s central bank has been pushing on a string all year. Atlanta Fed governor Bostic couldn’t agree more. Time for more action than words?
Gold Hits four-month low, breaking key support. Bitcoin is clearly stealing its thunder, which has risen by 50% in two weeks. If you’re considering gold, go take a long nap first.
Oil dives on delta surge, off $9, or 12% in a week, the lowest in three weeks. Delta is now rampaging throughout China, the world’s largest consumer of Texas tea., putting $63 in play.
Weekly Jobless Claims hit 375,000, down 12,000 on the week. Moving in the right direction but still incredibly high.
Berkshire Hathaway announces solid earnings, but scales back share buybacks at these elevated levels. Oracle of Omaha Warren Buffett bought back $6 billion of his own stock in Q2, leaving him with a staggering $144 billion in cash. Almost no stocks meet Buffett’s value standards in the current environment. Buy (BRKB) on dips. It’s a high-class problem to have.
Ed Yardeni is bullish, along with David Kostin, and is the only manager who comes close to my own $475 target for the (SPY) by the end of the year. The U.S. economy will be in nominal terms around 8% higher this year than pre-pandemic 2019. Sales for the S&P 500 companies will be 15% higher and earnings will be 34% higher. That is a representation of the operating leverage that exists in so many companies. The Roaring Twenties lives!
My Ten-Year View
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!
My Mad Hedge Global Trading Dispatch saw a modest +4.86% in July. My 2021 year-to-date performance appreciated to 74.07%. The Dow Average was up 16.00% so far in 2021.
I stuck with three positions, a long in (JPM) and a double short in the (TLT), all of which expire on Friday. My double short in the (SPY) punched me in the nose, forcing me to stop out for losses when I hit the lowest strike prices.
I then jumped into a very deep in-the-money call spread in Robinhood (HOOD) made possible only by the stock’s astronomically high volatility. Its 44% drop helped too. I also added a third short in the bond market.
That leaves me 30% in cash. I’m keeping positions small as long as we are at extreme overbought conditions.
That brings my 11-year total return to 496.62%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 12.56%, easily the highest in the industry.
My trailing one-year return retreated to positively eye-popping 106.69%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.
We need to keep an eye on the number of US Coronavirus cases at 36.7 million and rising quickly and deaths topping 622,000, which you can find here at https://coronavirus.jhu.edu.
The coming week will bring our monthly blockbuster jobs reports on the data front.
On Monday, August 16 at 7:00 AM, the New York Empire State Manufacturing Index is out.
On Tuesday, August 17 at 7:30 AM, US Retail Sales for July are published.
On Wednesday, August 18 at 5:30 AM, the Housing Starts for July are printed. At 2:00 PM, the minutes from the last FOMC are released.
On Thursday, August 19 at 8:30 AM, Weekly Jobless Claims are announced. Square (SQ) reports.
On Friday, August 20 at 2:00 PM, the Baker Hughes Oil Rig Count are disclosed.
As for me, upon graduation from high school in 1970, I received a plethora of scholarships, one of which was for the then astronomical sum of $300 in cash from the Arc Foundation.
By age 18, I had hitchhiked in every country in Europe and North Africa, more than 50. The frozen wasteland of the North and the Land of Jack London beckoned.
After all, it was only 4,000 miles away. How hard could it be? Besides, oil had just been discovered on the North Slope and there were stories of abundant high-paying jobs.
I started hitching to the Northwest, using my grandfather’s 1892 30-40 Krag & Jorgenson rifle to prop up my pack and keeping a Smith & Wesson .38 revolver in my coat pocket. Hitchhikers with firearms were common in those days and they always got rides. Drivers wanted the extra protection.
No trouble crossing the Canadian border either. I was just another hunter.
The Alcan Highway started in Dawson Creek, British Columbia, and was built by an all-black construction crew during the summer of 1942 to prevent the Japanese from invading Alaska. It had not yet been paved and was considered the great driving challenge in North America.
The rain started almost immediately. The legendary size of the mosquitoes turned out to be true. Sometimes, it took a day to catch a ride. But the scenery was magnificent and pristine.
At one point, a Grizzley bear approached me. I let loose a shot over his head at 100 yards and he just turned around and lumbered away. It was too beautiful to kill.
I passed through historic Dawson City in the Yukon, the terminus of the 1898 Gold Rush. There, abandoned steamboats lie rotting away on the banks, being reclaimed by nature. The movie theater was closed but years later was found to have hundreds of rare turn-of-the-century nitrate movie prints frozen in the basement, a true gold mine.
Eventually, I got a ride with a family returning to Anchorage hauling a big RV. I started out in the back of the truck in the rain, but when I came down with pneumonia, they were kind enough to let me move inside. Their kids sang “Raindrops keep falling on my head” the entire way, driving me nuts. In Anchorage, they allowed me to camp out in their garage.
Once in Alaska, there were no jobs. The permits required to start the big pipeline project wouldn’t be granted for four more years. There were 10,000 unemployed.
The big event that year was the opening of the first McDonald’s in Alaska. To promote the event, the company said they would drop dollar bills from a helicopter. Thousands of homesick showed up and a riot broke out, causing the stand to burn down. It was rumored their burgers were made of moose meat anyway.
I made it all the way to Fairbanks to catch my first sighting of the wispy green contrails of the northern lights, impressive indeed. Then began the long trip back.
I lucked out catching an Alaska Airlines promotional truck headed for Seattle. That got me free ferry rides through the inside passage. The driver wanted the extra protection as well. The gaudy, polished tourist destinations of today were back then pretty rough ports inhabited by tough, deeply tanned commercial fishermen and loggers who were heavy drinkers always short of money. Alcohol features large in the history of Alaska.
From Seattle, it was just a quick 24-hour hop down to LA. I still treasure this trip. The Alaska of 1970 no longer exists, as it is now overrun with summer tourists. It now has more than one McDonald’s. And with runaway global warming, the climate is starting to resemble that of California than the polar experience it once was.
Good Luck and Good Trading.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
The Alcan Highway Midpoint
The Alaska-Yukon Border in 1970
