Global Market Comments
March 25, 2024
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE BEST WEEK OF THE YEAR),
(PANW), (NVDA), (LNG), (UNG), (FCX), (TLT), (XOM), (AAPL), (GOOG), (MSTR), (BA), (FXY)
Tag Archive for: (PANW)
You need to have a sense of humor and a strong dose of humility to work in this market. After predicting last week that the market would NOT crash but grind sideways, it then posted the next week of the year. Stocks are actually accelerating their move to the upside.
Of course, we got a big assist from Fed Governor Jay Powell who practically wrote in his own blood a promise that interest rates would be cut at least three times by the end of the year. That is quite a gesture, and all risk assets loved it, even the ones that have been asleep for a year, like gold (GLD) and silver (SLV).
Miraculously, this does happen and there has been a big one over the last two years that nobody knows about.
Cheniere Energy (LNG) shipped 640 tankers full of natural gas (UNG) to Europe last year and 630 in 2022. One tanker provides enough gas to heat one million homes for a month. You can do the math. In total, it has sent out 3,400 tankers since 2016, mostly to China.
When Russia invaded Ukraine in 2022, Europe was totally dependent on Vladimir Putin for gas. Any doubt about the Russian supply was ended when the Nordstream undersea pipeline was mysteriously blown up. A total cut-off would have been an economic disaster and caused the collapse of NATO.
Two years ago, it was believed that even if we could get the gas to Europe, there were no facilities to liquefy natural gas as it is shipped back into natural gas. Then 16 floating de-liquefaction plants showed up out of nowhere.
Natural gas demand has been soaring in the US as well. Over the past 20 years, coal has dropped from generating 50% of the US electric power supply to only 19% (the unused American share of the coal was sold to China). That has eliminated 500 million tons of carbon dioxide from entering the atmosphere.
If you noticed that the skies over American cities are getting clearer, this is the reason.
Much has been made over Biden’s “pause” of permitting for new natural gas facilities. The reality is that it will take four years to build the 16 new gas export facilities that have already been approved. By then, we’ll have a new president. All Biden did was throw a bone at the environmental wing of his party. Such are the ways of Washington.
By the way, the Republican Party now has an environmental wing too. Who knew? It’s all proof that if you live long enough, you see everything.
One of the reasons I have been in love with cybersecurity stocks like Palo Alto Networks (PANW) for the past decade is that hacking is the ultimate growth industry. It never goes out of style, is recession-proof, and is growing at an exponential rate.
It is also getting more sophisticated. The big hackers are franchising their business models, inviting in criminals with minimal computer knowledge, vastly increasing their numbers. They are attacking small vendors to large companies to get access to the big ones. They are also picking targets too poor to afford the big cybersecurity companies. The City of Oakland is a classic example, which was prevented from paying its teachers for six months. And now they have AI.
Spending on cybersecurity is expected to grow from $188 billion in 2023 to $215 billion this year, a gain of 14.36%. The number of data breaches has rocketed by 78% over the past two years. Buy (PANW) on dips, which we are seeing right now.
“We’re going to need a bigger GPU” to borrow a famous line from Stephen Spielberg’s blockbuster Jaws.
If you want a peak at the future, both of our own and NVIDIA stock, check out the company’s latest entry into the chip wars, the $50,000 Blackwell GPU, available in a few months. In layman’s terms, it offers four times the computing ability but requires only one-quarter of the electric power, which is increasingly becoming an AI issue. It also uses deep learning to write its own software.
The chip was introduced by CEO Jensen Huang at the Developers conference in San Jose, which I attended in a venue normally occupied by rock stars. Huang started the conference by warning he was not there to sing. But perform he did, accompanied by a group of dancing robots powered by AI.
And while NVIDIA’s sales have tripled over the past year, you ain’t seen anything yet. When I recommended (NVDA) for the millionth time at $400 a share last October, my long-term target was $1,000. It recently hit $975, now stands at $943, and shows no sign of abating. NVIDIA could well keep powering on until the actual release of the Blackwell chip.
As in Jaws, I sense a feeding frenzy coming and (NVDA) shorts are the bait.
In February we closed up +7.42%. So far in March, we are up +3.53%. My 2024 year-to-date performance is at +6.67%. The S&P 500 (SPY) is up +9.22% so far in 2024. My trailing one-year return reached +56.98% versus +52% for the S&P 500.
That brings my 16-year total return to +683.30%. My average annualized return has recovered to +51.57%.
Some 63 of my 70 round trips were profitable in 2023. Some 11 of 19 trades have been profitable so far in 2024.
I miniated no new longs last week, content to let my existing longs run in Freeport McMoRan (FCX), bonds (TLT), and ExxonMobile (XOM). I am 70% in cash given the elevated state of the market and am looking for new commodity and energy plays to pile into.
Fed Chair Jay Powell Promises Three Interest Rate Cuts of 25 basis points each, at his press conference on Wednesday. Powell said he did not see "cracks" in the labor market, which he described as "in good shape," noting that "the extreme imbalances that we saw in the early parts of the pandemic recovery have mostly been resolved." These are very pro-risk statements. Buy the dips in everything.
Fed to Dial Back Quantitative Tightening, or QT from the current $120 billion a month. It’s a huge plus for risk assets and explains why the most liquidity-driven ones like gold and silver had such a great day. Buy (GLD) and (SLV) on dips.
The Dept of Justice Goes After Apple on Antitrust, on its 61.3% share of the US smartphone market. It accused the iPhone maker of blocking rivals from accessing hardware and software features on its popular devices. Google’s (GOOG) Android actually has a bigger global market share at 70.3% with Apple at only 24%. This is another waste of time that will last ten years and go nowhere.
Bank of Japan to Cut Interest Rates as Early as April, bringing to an end a 34-year stimulus program that was a dismal failure. The Japanese yen (FXY) should rocket, but Japanese stocks not so much.
MicroStrategy (MSTR) Dives 18%, the largest owner of Bitcoin, on a crypto correction. MicroStrategy is the largest corporate owner of Bitcoin. (MSTR) just completed a massive borrowing to buy more crypto at the top. After SEC approval of ETFs and the imminent halving, what is left to drive crypto? Avoid (MSTR) which was blindsided by the last 90% crypto correction.
Existing Homes Sales Soar 9.7% in February to 4.38 million units, on a seasonally adjusted annualized basis. Inventory rose 5.9% year over year to 1.07 million homes for sale at the end of February. That represents a still low 2.9-month supply at the current sales pace. Higher demand continued to push the median price higher, up 5.7% from the year before to $384,500.
Home Prices Have Risen by 2.4 Times the Inflation Rate Since 1960. The cost of a typical house in the U.S. is nearly half a million dollars: the median price for a home in the U.S. is $412,778, according to Redfin data. That’s what successful demographic tailwinds leading to a chronic housing shortage get you.
Boeing is Leasing 36 Airbuses, to meet its own unfilled orders caused by production delays. Another panel fell off an airborne plane last week in Medford, OR. Looking for missing parts has become a regular part of every Boeing landing. This is an act of desperation. Avoid (BA)
My Ten-Year View
When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old.
Dow 240,000 here we come!
On Monday, March 25, at 7:00 AM EDT, the US Building Permits are announced.
On Tuesday, March 26 at 8:30 AM, S&P Case Shiller for February is released.
On Wednesday, March 27 at 11:00 AM, the MBA Mortgage Data is published
On Thursday, March 28 at 8:30 AM, the Weekly Jobless Claims are announced. The final read of the Q2 US GDP is also out.
On Friday, March 29 at 2:00 PM, Personal Income and Spending is out. The Baker Hughes Rig Count is printed.
As for me, as I am about to take off for Cuba to visit Finca Vigia (Lookout Farm), the home of Earnest Hemingway and Martha Gellhorn I thought I’d review my long history with this storied family. This is where he finished For Whom the Bells Toll, his epic novel about the Spanish Civil War.
My grandfather drove for the Italian Red Cross on the Alpine front during WWI, where Hemingway got his start, so we had a connection right there going back over 100 years.
Since I read Hemingway’s books in my mid-teens, I decided I wanted to be him and became a war correspondent. In those days, you traveled by ship a lot, leaving ample time to finish off his complete work.
I visited his homes in Key West and Ketchum Idaho. In 2023, he stayed at his Hotel Poste room in Cortina, Italy where he lived for five months during the 1950s. His Cuban residence was high on my list, now that Castro is gone.
I used to stay in the Hemingway Suite at the Ritz Hotel on Place Vendome in Paris where he lived during WWII. I had drinks at the Hemingway Bar downstairs where war correspondent Ernest shot a German colonel in the face at point-blank range. I still have the ashtrays.
Harry’s Bar in Venice, a Hemingway favorite, was a regular stopping-off point for me. I have those ashtrays too.
I even dated his granddaughter from his first wife, Hadley, the movie star Mariel Hemingway, before she got married, and when she was still being pursued by Robert de Niro and Woody Allen. Some genes skip generations and she was a dead ringer for her grandfather. She was the only Playboy centerfold I ever went out with. We still keep in touch.
So, I’ll spend the weekend watching Farewell to Arms….again, after I finish this newsletter.
Oh, and if you visit the Ritz Hotel today, you’ll find the ashtrays are now glued to the tables.
Hemingway in 1917
At Work on Hemingway’s Typewriter
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
March 11, 2024
Fiat Lux
Featured Trade:
(The Mad MARCH traders & Investors Summit is ON!)
(MARKET OUTLOOK FOR THE WEEK AHEAD, or HIGHER HIGHS)
(NVDA), (META), (IWM), (AMZN), (RIVN), (SNOW), (GLD), (GOLD), (NEM), (FXI), DELL), (AAPL), (TSLA), (CCJ), ($NIKK), (USO), (GOLD)
Mad Hedge Technology Letter
March 8, 2024
Fiat Lux
Featured Trade:
(APPLE NEEDS TO UP ITS GAME)
(CRWD), (PANW)
It’s no longer Apple’s world.
Times have changed.
Management at Apple including CEO Tim Cook need to get with the times or else they risk being left behind.
Large existential risks aren’t only felt by Apple, most of the tech sector risk being left behind by the AI bandwagon.
If there was any inkling that I might be wrong about this then explain the latest data point about Apple’s lackluster sales in Asia.
Sales of Apple’s iPhone plunged in China by 24% year over year as Apple faced stiff competition from local smartphone firms like Huawei, Oppo, Vivo and Xiaomi.
Apple came under particular pressure from Chinese tech giant Huawei, whose consumer business is experiencing a resurgence in China after the launch of its Mate 60 smartphone.
Several rival Chinese smartphone companies also logged drops in their unit sales in the six-week period, but the declines were less pronounced than that of Apple.
The best-performing smartphone brands for the first six weeks were Huawei and its spinoff Honor, which branched out of the tech giant in 2020 as a result of U.S. sanctions.
Huawei smartphone unit shipments rose 64% year over year in the first six weeks of 2024.
Apple is facing a backbreaking environment in its cash cow China.
Local Chinese smartphone makers have caught up and make a pretty nice version of a smartphone comparable to the iPhone including a reinvigorated Huawei.
Customers flocked to iPhones, once Huawei’s phones lost their competitiveness due to the lack of 5G and no cutting-edge semiconductors.
Losing the China market is a big blow to Apple’s management as deglobalization picks up speed.
Even more worrying is why isn’t Apple hopping on the AI bandwagon?
They risk being left behind as the “iPhone company.”
It’s not emerging as one of the largest risk to Apple’s strategic future.
They did well with last generation’s technology, but they look gradually misplaced for the next round of technological modernizations.
I haven’t heard much of what they are doing in AI, and they had to fire their team that worked on the Apple car.
No doubt that Apple shareholders are starting to question what management has up its sleeves and before it was ok to return to the well with iPhone sales growing.
However, we have clearly entered a paradigm shift where the iPhone well has run dry and shareholders are expecting more.
If Tim Cook can’t figure it out then large investors like Warren Buffett could start to unload shares in batches which could demoralize the stock in the short-term.
For now, I do believe Apple is worth a trade to the upside because it’s so beaten down.
It shocking that we have gotten to this point with Apple, but tech companies are all at risk of extinction unless they evolve with the times.
For the first time in a long time, it’s right to question whether to hold Apple shares for the long haul.
Global Market Comments
March 8, 2024
Fiat Lux
Featured Trade:
(MARCH 6 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPX), (QQQ), (PANW), (SNOW), (NVDA), (GLD), (GOLD), (NEM), (BA), (AMZN), (TLT), (AAPL), (COIN)
Below please find subscribers’ Q&A for the March 6 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: With your projections of the Dow going to $240,000 in 10 years, would it be wise to invest in the Dow?
A: The Dow is just an indicator that everybody understands and is familiar with what the media uses. What I tell people to do is if you are not an aggressive person, put half your money in the S&P 500 (SPX), which is getting most of the gains, and half in the technology (QQQ), which is getting all of the gains. If you're an aggressive person, say in your twenties, thirties, or forties, then you put all of your money in the Invesco QQQ NASDAQ Trust (QQQ) because you'll live long enough to survive the inevitable downturns.
Q: What should we do now with Palo Alto Networks (PANW)?
A: Keep it. It’s a fantastic long-term company. This is a rare opportunity to get in on the long side, as this is a company that I think could double over the next 3 to 5 years. Hacking is never going out of style and now they have AI. The selloff was caused by a major platform upgrade which may cause profits to dip for a quarter. That’s now in the price.
Q: With the successful launch of Bitcoin, should we allocate 5% or 10% of our portfolio to Bitcoin?
A: Only if you can handle a 90% decline at any time without warning because that's exactly what it did in 2021. Calling it a store of value is a fantasy. You also still have big theft issues with Bitcoin. You don't have theft issues if you have all your money at Morgan Stanley, Goldman Sachs, Merrill Lynch, and so on, so there is a security issue (with Bitcoin). The only way to bypass the security issues is to have a hot wallet, and the only way to have a hot wallet is to be a computer programmer yourself or have a degree in computer science—so it's not for most people. If you can navigate all of that, then maybe; but again, nobody knows when the next 90% decline is going to come. By the way, if I can find stocks with Mad Hedge Fund Trader that go up faster than Bitcoin, I'd much rather own the stocks, because at least I know what they make.
Q: Is Snowflake (SNOW) a buy here at $155?
A: Absolutely. Another great cybersecurity database company. But if we drop to $155, we're going to stop out of the front month call spread and try to buy it back lower down.
Q: Do you think it's wise to sell the semiconductor stocks now and buy them back lower down, and pay the taxes?
A: Probably not. They are really the most volatile sector in the market. If you sell now, it's unlikely you'll be able to pick up the next bottom and get back in, and you have to pay the taxes. So it's probably better just to keep a core long-term position in the semis, especially Nvidia (NVDA); and if it drops 200 points, just buy more. That's what I'm doing. I'm keeping all of my Nvidia LEAPS. All my call spreads and short put positions are about to expire at max profit, and I even have a little bit of stock that I'm keeping. So I think Nvidia goes to $1,000 at one point and now, the forecast of $1,400 is out there. So as Nvidia goes, so goes the entire rest of the semiconductor industry.
Q: You're only 30% invested. Are you looking for a pullback, or are you just waiting for new opportunities to appear?
A: Yes and Yes. I'm waiting for a fantastic company to come up with conservative guidance, which these days means an immediate 20 to 25% sell-off. That is your entry point for these good companies. That's how we got into Palo Alto Networks (PANW), and that's how we got into Snowflake (SNOW). In an extremely overbought market, those are your only opportunities until the market generally sells off or until the domestic plays finally start to take off, and we got the first hints of that last week.
Q: What is your view on junior gold mining stocks?
A: They are a buy here, absolutely, but you get enough volatility in the majors that you don't need to bother with the minors—that's always been my view. Because minors go out of business, they close mines, they don't find gold. A lot of minors have stocks go up on the possibility of gold being found, whereas the majors like Barrick Gold (GOLD) and Newmont Mining (NEM) actually have the gold, and it's just an industrial process of mining it. You know the minors, the juniors, are extremely speculative and high-risk, and that's why most of them are listed in Canada. They can't get a US listing. So that's enough of a tell for me to stay away.
Q: I just realized I have the wrong expiration date on my Amazon (AMZN) spread. Should I exit immediately?
A: What I would do is exit what you have and then wait for another down day on Amazon, and then put it back on. That's the way to deal with that one. The answer to all mistakes is to exit immediately. That's an automatic rule at Morgan Stanley; if you don't do that, you get fired. Or come up with a new set of logic as to why you own this position, which has been done by more than a few traders, I imagine.
Q: Would you be willing to be a Boeing 737 Max passenger right now or ever?
A: Yes! If you don't fly Boeings (BA), your life is suddenly very narrow and limited because you’re stuck on the ground. Boeing is the biggest-selling airplane in the world, and most fleets are made of Boeings. However, I'm a pilot, so if anything goes wrong I can run up front and take control, or at least tell the pilot what to do. I also have 25 parachute jumps, if they're handing those out in first class. So remember, every airplane without engines is a glider and I can land a glider anywhere. The company has major problems to sort out until it becomes a “BUY”.
Q: I cannot get into the (TLT) trade to save my life. Is the (TLT) April $89-$92 vertical bull call debit spread pushing the risk limits?
A: Yes. I would walk away from the trade and wait for a better entry point rather than chase. The whole fixed-income space has flipped from the bid side to the offered side, meaning we've gone from net sellers to net buyers. All asset classes have done that; you're seeing that in gold, silver, and even uranium. All the REITs are having a fantastic week. All interest rate plays are now being bid, and it's hard to buy stuff when things are being bid.
Q: What's it like being 6’4” and living in Japan?
A: Well, I did knock myself out a couple of times, banging myself on the door. You get used to bowing a lot, but bowing is a part of the culture in Japan. If you're watching the new Hulu miniseries, Shogun, you would know that. Once I was working for Sony and I was late for work, so I was running up the stairs, and they had a steel lintel to their door, and I just ran bang into that and knocked myself out. The Sony people thought, “Oh my gosh, we just killed a foreigner!” So yes, it was hard. The only clothes I could buy in Japan for ten years were belts and ties. I had to fly to Hong Kong and had everything else custom-made in those days.
Q: What's your opinion of Masters of the Air?
A: I absolutely love it. It's heartbreaking to watch. I knew a lot of guys who were there, and I was one of the last people trained on how to fly a Boeing B-17 Flying Fortress. Anybody who watched Masters of the Air with me gets to watch it with someone who is one of the last living people who rated on a B-17 as a pilot.
Q: Are we in a liquidity bubble right now?
A: Yes, we are, and boy, I love every minute of it. But we're not in the year 2000 in a liquidity bubble, we're in 1995 just getting started. And the profits from AI are just getting started which is what's creating this endless liquidity that people are seeing now.
Q: What should I buy the dip in Tesla (TSLA)?
A: There's no downside target for Tesla right now. We just have to wait for the meltdown in demand to finish, and who knows where that is. But with BYD entering the market, Tesla is definitely going to get more competition in emerging markets—that's where BYD is selling the cars now. I also understand they're selling them in Australia.
Q: How much longer can tech stocks keep rising?
A: 5 to 10 more years, but we are way overdue for some kind of pullback.
Q: What are your thoughts on Apple's (APPL) weakness?
A: Apple has become that great backward-looking company. It could drop to $160 or even $140, then we’ll be taking a serious look at some call spreads and LEAPS. You just wait. In four months when they announce their next batch of new products suddenly, they’ll become an AI company and recover the $200 level in no time.
Q: Should I dive into Coinbase (COIN)?
A: Absolutely not on pain of death! It's made its move. You're better off buying Nvidia (NVDA) at that kind of inclination because at least you know what they make.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then 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
Thank You NVIDIA!
Mad Hedge Technology Letter
March 6, 2024
Fiat Lux
Featured Trade:
(CYBER SECURITY IS STILL GROWTH)
(CRWD), (PANW)
Since starting the company, CrowdStrike (CRWD) has brought cybersecurity to the cloud.
They have pioneered AI for cybersecurity, and quickly become the de-facto security platform that disrupts, displaces, and consolidates other vendors.
This stock has been really good to Mad Hedge Tech Letter followers, and we recently took profits in a successful in-the-money bull call spread in CRWD.
Money will flow into enterprise protection as the stakes get higher with hackers looking to strike gold.
When talking about the threat landscape, CrowdStrike pioneered commercial threat intelligence that governments and companies of all sizes depend on.
It's CrowdStrike that delivers billions of new threat detections every month to stop breaches.
It's CrowdStrike that is the search bar of security, where security analysts complete millions of queries daily.
What took hackers hours, has shrunk to minutes and seconds. Attack speeds will only accelerate.
The cloud is increasingly under attack and CRWD exists to protect businesses against these attacks.
CRWD tracked a 75% year-over-year increase in cloud intrusion attempts.
The cloud is today's battleground for cyberattacks.
Generative AI is an adversary force multiplier and the last few years have seen the onboarding of this new force multiplier.
Gen AI puts advanced cybercrime tradecraft in the hands of attackers of all skill levels. Gen AI will dramatically grow the adversary population.
CRWD collects trillions of threat signals daily, creating one of the world's largest and fastest-growing cyberthreat datasets.
From day one, CRWD has been an AI company, training the industry's most effective and accurate AI models to prevent attacks based on data mode.
Embedded in the Falcon platform is a virtuous data cycle where CRWD collects cybersecurity's very best threat intelligence data, builds, and trains robust preventative and generative models, and protects CRWD customers with community immunity.
In today's environment of heightened cyberattacks, the latest SEC breach disclosure regulation only increases the pressure on companies and their boards.
One of the best of breeds and its superior performance are a critical reason to why the share price has moved up in the last few years.
Let’s look at the numbers behind the business model.
Moving to the P&L, total revenue grew 33% year over year to reach $845.3 million.
Subscription revenue grew 33% over Q4 of last year to reach $795.9 million. Professional services revenue was $49.4 million, representing 26% year-over-year growth.
Subscription customers were five or more, six or more, and seven or more modules growing to 64%, 43%, and 27% of subscription customers, respectively.
CRWD is landing bigger with new customers on average adopting 4.9 modules out of the gate, an increase over last year. CRWD’s gross retention rate remained high at 98%.
CRWD is knocking it out of the park.
It’s hard to maintain growth company status in the head of major macro headwinds.
Many enterprise businesses are pulling back spend, but cybersecurity hasn’t been curtailed as of yet.
Tech companies are becoming more efficient and cybercrime hasn’t felt the pain of leaner software budgets.
This bodes well for the future of cyber security and the main players in the industry.
Global Market Comments
February 23, 2024
Fiat Lux
Featured Trade:
(FEBRUARY 21 BIWEEKLY STRATEGY WEBINAR Q&A),
(FXI), (SMCI), (PANW), (TSLA), (NVDA), (XLF),
(CCI), (XOM), (FANG), (AMD), (HD), (LOW)
