(SPY) Archives

Market Outlook for the Week Ahead, or the Scary Thing About the Markets

There’s one big scary thing about the markets right now. As I mentioned last week, the major indexes are sitting on a precipice of a right shoulder of a ‘Head and Shoulders” top.

Traders are expecting a trade war settlement and a Fed interest rate cut in July. While the economy in no way needs a rate cut, stock markets desperately do. In fact, they need another dose of steroids just to remain level. It reminds me of a certain recent California governor (I’ll be back).

If we get them, markets will grind up a few percentage points to a new all-time high. If we don’t, the top is in, possibly for this entire economic cycle, and a 25% swan dive is in the cards.

It's what traders call “Asymmetric risk.” If we get the bull case, you make sofa change. If we don’t, you lose dollars. It’s what I call picking up pennies in front of a steamroller. But in the 11^th year of a bull market, that’s all you get. The truly disturbing part of this is that this setup is happening with valuation close to a historic high at a 17.5X price earnings multiple.

We’ll get a better read on Wednesday at 2:00 PM EST when the Fed announces its decision on interest rates. The post meeting statement will be more crucial than usual. What’s in a word, Shakespeare might have asked? If the Fed drops the word “Patient”, then a July interest rate cut is a sure thing. The algos reading the release at the speed of light will be the first to know.

It was initially off to the races last Monday when the one-week trade war with Mexico came to an end and some immigration issues were settled.

The tariffs are off, even though the Mexicans say the terms were already agreed to months ago.

There is no big ag buy either. The economy is still sliding into a recession, and the bond market has already discounted three of the next five quarter point rate cuts.

US exports are in free fall, with Long Beach, America’s busiest port, seeing seven straight months of declines in shipping volumes. They were off 19.5% in May alone. Recession indicator no. 199.

Buy bonds (TLT), gold (GLD), and short the US dollar (UUP), says my old friend, hedge fund legend Paul Tudor Jones. He is certainly reading the writing on the wall. The legendary trading billionaire believes that plunging interest rate cuts are going to dominate the scenery for the rest of 2019.

Tanker attacks sent oil soaring. After 50 years of waiting, it finally happened, torpedo attacks against two tankers in the Straits of Hormuz bound for China. Oil rocketed 4%, then gave up the rally, and stocks are amazingly up on the day.

Go figure. A decade ago, this would have been a down 1,000-point day for stocks and Texas tea would have soared to $100. Clearly, tensions in the Middle East are ratcheting up, but with the US now the swing oil producer, why bother?

With US oil production climbing to 17 million barrels a day by 2024, up from 5 million b/d in 2005, the Middle East can blow itself up and nobody cares. The US by then will have created an entire Saudi Arabia’s worth of new oil production over a 20-year period. US troops there are defending China’s oil supply, not ours.

The US budget deficit soared by 38.7% YOY, to $739 billion. It’s the fastest growth in government borrowing since WWII. Much of today’s economic growth in on credit and this can only end in tears. Enjoy the good times while they last.

Major semiconductor maker Broadcom (AVGO) disappointed hugely on earnings, tanking the market, and the stock plunged a heartbreaking 12%. The trade war gets the entire blame. It turns out that Broadcom’s biggest customer is the ill-fated Huawei whose CFO is now sitting in a Canadian jail awaiting extradition to the US. Other semiconductor stocks especially got slammed. The canary in the coal mine just died.

China’s industrial production hit a 17 year low, and yes, it’s because of the trade war, trade war, trade war. When your biggest customers come down with the Asian flu, you at the very least catch a severe cold. Start shopping for Robitussin.

Global Trading Dispatch closed the week up 15.38% year-to-date and is down by -0.34% so far in June. That’s show business. You work your guts out trying to understand this market and it turns out to be for free. Or worse yet, you get a bill without an amount due. This is something that regular salary earners don’t understand.

My nine and a half year profit appreciated to +315.52%, pennies short of a new all-time high. I think I’ll be flatlining at a high for a while to create a base from which I can jump to new highs. The average annualized return ticked up to +33.21%. With the trade war with China raging, I am now 100% in cash with Global Trading Dispatch and 100% cash in the Mad Hedge Tech Letter.

My twin bets on Tesla (TSLA) worked out very nicely and I took profits on both. It was an option play whereby I expected that (TSLA) shares would not fall below $150 or rise above $240 by the June 21 option expiration.

Several followers have seen good success using every Tesla dip below $200 to go naked short August $100 or $125 Tesla puts in small quantities for a decent amount of change.

The long view here is to wait for some kind of summer meltdown and then go long into a year-end rally as 2020 election-related turbochargers start to hit the market.

The coming week will be all about waiting for the Fed to jump. We also get some important updates on housing data.

On Monday, June 17 at 8:30 AM EST the Empire State Manufacturing Index is out.

On Tuesday, June 18, 8:30 AM EST, the May Housing Starts are released.

On Wednesday, June 19 at 2:00 PM EST, the Federal Reserve decision on interest rates is announced. Vital is whether the word “Patient” remains in their statement.

On Thursday, June 20 at 8:30 AM, the Weekly Jobless Claims are printed. We also get the Philadelphia Fed Manufacturing Index.

On Friday, June 21 at 10:00 AM, we learn May Existing Home Sales. The Baker Hughes Rig Count follows at 2:00 PM.

As for me, by the time you read this, I will be winging my way somewhere over the Pacific Ocean. It’s a 14-hour flight from California to New Zealand, and the plane carries two crews.

It’s a genuine four movie flight. I’ll take off on Sunday and don’t arrive until Tuesday because I’ll be crossing the International Dateline. When I arrive, I’ll feel like death warmed over. It’s all in the name of research and finding that next great trading idea.

Good luck and good trading.

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

June 4, 2019

Diary, Newsletter, Summary

Global Market Comments
June 4, 2019
Fiat Lux

Featured Trade:

(WEDNESDAY, JUNE 26 SYDNEY, AUSTRALIA STRATEGY LUNCHEON)
(TEN UGLY MESSAGES FROM THE BOND MARKET),
(TLT), (TBT), (USO), (GLD), (GS), (SPY)

June 3, 2019

Diary, Newsletter, Summary

Global Market Comments
June 3, 2019
Fiat Lux

Featured Trade:

(MONDAY, JUNE 24 MELBOURNE, AUSTRALIA STRATEGY LUNCHEON)
(MARKET OUTLOOK FOR THE WEEK AHEAD, OR WHAT A WASTE OF TIME!),
(SPY), ($INDU), (JPM), (MSFT), (AMZN), (TSLA)

The Market Outlook for the Week Ahead, or What a Waste of Time!

Diary, Newsletter

“Sell in May and go away” has long suffered from the slings and arrows of non-believers, naysayers, and debunkers.

Not this time.

Looking at the trading since April 30, we have barely seen an up day. Since then, the Dow Average has plunged 1,900 points from a 26,700 high, a loss of 7.1%. We are now sitting right at my initial downside target of the 200-day moving average.

The Dow has now given up virtually all its 2019 gains, picking up only 2.0%. In fact, the market is dead unchanged since the end of 2017. If you have been an index investor for the past 17 months, your return has been about zero. In other words, it has been a complete waste of time.

There are a lot of things I would have preferred to do rather than invest in index funds for the past year and a half. I could have hiked the Pacific Crest Trail….twice. I might have taken six Cunard round-the-world cruises and met several rich widows along the way. I might even have become fluent in Italian and Latin. Such is the value of 20-20 hindsight.

You would have done much better investing in the bond market, which has exploded to a new two-year high, taking the ten-year US Treasury yield down to a once unimaginable 2.16%. During the same period, the (TLT) has gained 11 points, or 9.0% plus another 3.0% worth of interest. You did even better if you invested in lower grade credits.

Which leads us to the big question: Will stocks bottom out here, or are we in for a full-on retrace to the December lows?

Unfortunately, recent events have conspired to point to the latter.

The United States has now declared trade wars against all neighbors and allies around the world: China, Mexico, Europe, and Canada. On Friday, it announced 25% punitive tariffs against Mexico before NAFTA 2.0 was even ratified before Congress, thus rendering it meaningless. Businesses are dropping like flies.

As a result, GDP forecasts have been falling off a cliff, down from 3.2% in Q1 to under 1% for Q2. The administration’s economic policy seems to be a pain now, and more pain later. It is absolutely not what stock investors want to hear.

If you are a business owner now, what do you do with the global supply chain being put through a ringer? Sit as firmly on your hands as possible and do nothing, waiting for either the policy or the administration to change. Stock investors don’t want to hear this either. The fact that stock markets entered this cluster historically expensively is the fat on the fire.

Having hummed the bear national anthem, I would like to point out that stocks could rally from here. We enter a new month on Monday. There will be plenty of opportunities to make amends and the G-20 meeting which starts on June 20. This should provide a backdrop for a rally of at least one-third of the recent losses, or about 600 points.

But quite honestly, if that happens, I’ll be a seller. The economy is doing the best impression of going down the toilet that I can recall, and that includes 2008. Only this time, all the injuries are self-inflicted.

As the trade war ramped up, China moved to ban FedEx (FDX) and restrict rare earth exports (REMX) to the US essential for all electronics manufacture. Most modern weapons systems can’t be built without rare earths. The big question in investors' minds becomes “Is Apple next?”

The OECD cut its global growth forecast from 3.9% to 3.1% for 2019 because of you know what. Stock markets are now down for their sixth week as the 200-day moving average comes within striking distance.

There was more bad news for real estate with April Pending Home Sales down 1.5%. If rates this low can’t help it, nothing will. Where are those SALT deductions?

The bear market in home prices continued in March with the Case Shiller CoreLogic National Home Price Index showing a 3.7% annual price gain, down 0.2%. Home price in San Francisco is posting negative numbers. When will those low-interest rates kick in?

The bond market says the recession is already here with ten-year interest rates at 2.16%, a new 2019 low. German bunds hit negative -0.21%. JP Morgan (JPM) CEO Jamie Diamond says the trade war could cause real damage to the US economy.

US Capital Goods fell out of bed in April, down 0.9%, in another important pre-recession indicator. No company with sentient management wants to expand capacity ahead of an economic slowdown.

Despite all the violence and negativity, the Mad Hedge Fund Trader managed to crawl to new all-time highs last week, thanks to some very conservative positioning on the long side in the right names.

Those would include Microsoft (MSFT), Amazon (AMZN), and Tesla (TSLA). All of these names were down on the week, but the vertical bull call spreads were up. You see, there is a method to my madness!

Global Trading Dispatch closed the week up 16.30% year-to-date and is up 0.51% so far in May. My trailing one-year declined to +19.71%.

The Mad Hedge Technology Letter did fine, making money on longs in Microsoft (MSFT) and Amazon (AMZN). Some 10 out of 13 Mad Hedge Technology Letter round trips have been profitable this year.

My nine and a half year profit jumped to +316.55%. The average annualized return popped to +33.32%. With the trade war with China raging, I am now 70% in cash with Global Trading Dispatch and 80% cash in the Mad Hedge Tech Letter.

I’ll wait until the markets enjoy a brief short-covering rally before adding any short positions to hedge my longs.

The coming week will be a big one with the trifecta of big jobs reports.

On Monday, June 3 at 7:00 AM, the May US Manufacturing PMI is out.

On Tuesday, June 4, 9:00 AM EST, the April US Factory Orders are published.

On Wednesday, June 5 at 5:15 AM, the May US ADP Employment Report of private hiring trends is released.

On Thursday, June 6 at 5:30 AM, the April US Balance of Trade is printed. At 8:30 Weekly Jobless Claims are published.

On Friday, June 7 at 8:30 AM, we learn the May Nonfarm Payroll Report is announced which lately has been incredibly volatile.

As for me, I am going to be leading the local Boy Scout troop on a 20-mile hike with a 2,500-foot vertical climb in the Oakland Hills. Hey, you never know when Uncle Sam is going to come calling again. I need to stay boot camp-ready at all times.

At least I can still outpace the eleven-year-olds. I’ll be leaving my 60-pound pack in the garage so it should be a piece of cake.

Good luck and good trading.

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

May 24, 2019

Diary, Newsletter, Summary

Global Market Comments
May 24, 2019
Fiat Lux

Featured Trade:
(MONDAY JULY 8 VENICE, ITALY GLOBAL STRATEGY LUNCHEON)
(FROM THE FRONT LINE OF THE TRADE WAR)
(SPY), (AAPL), (TLT)

From the Front Line of the Trade War

Diary, Newsletter

Poke your hand into a hornet's nest and you can count on an extreme reaction, a quite painful one.

As California is the growth engine for the entire US economy, accounting for 20% of US GDP, it is no surprise that it has become the primary target of Chinese retaliation in the new trade war.

The Golden State exported $28.5 billion worth of products to China in 2017, primarily electronic goods, with a host of agricultural products a close second.

In the most devious way possible, the Middle Kingdom targeted Trump supporters in the most liberal state in the country with laser-like focus. California exports 46% of its pistachios to China, followed by 35% of its exported plums, 20% of exported oranges, 12% of its almonds.

By comparison, California imported gargantuan $160.5 billion worth of goods from China last year, mostly electronics, clothing, toys, and other low-end consumer goods.

Some $16 billion of this was recycled back into the state via investment in real estate and technology companies.

Anecdotal evidence shows that figure could be dwarfed by the purchase of California homes by Chinese individuals looking for a safe place to hide their savings. Local brokers report that up to one-third of recent purchases have been by Chinese nations paying all cash.

The Chinese tried to spend more. Their money is thought to be behind Broadcom’s (AVGO) $105 billion bid for QUALCOMM (QCOM), which was turned down for national security reasons.

The next big chapter in the trade war will be over the theft of intellectual property, and that one will be ALL about the Golden State.

Also at risk is virtually Apple’s (AAPL) entire manufacturing base in China where more than one million workers at Foxconn assemble iPhones, Macs, iPads, and iPods. It took Apple 20 years to build this facility. It will take 20 more years to move it.

The Cupertino giant could get squeezed from both sides. The Chinese could interfere with its production facilities, or its phones could get slapped with an American import duty.

By comparison, in 2017 the US imported a total of $505.6 billion in goods from China and exported $130.4 billion. Against this imbalance, the US runs the largest surplus in services.

The last Chinese escalation will involve a 25% tariff on American pork and recycled aluminum. Who is the largest pork producer in the US? Iowa, with $4.2 billion worth, the location of an early presidential election primary.

Beyond that, Beijing has darkly hinted that is will continue to boycott new US Treasury bond auctions, as it has done for the past six months, or unload some of its massive $1.6 trillion in bond holdings.

Given the price action in the bond market today, with the United States Treasury Bond Fund (TLT) at a two-year high, I would say that the market doesn’t believe that for two seconds. The Chinese won’t cut off their nose to spite their face.

The administration is discovering to its great surprise that its base is overwhelming against a trade war. And as business slows down, it will become evident in the numbers as well.

The US was the big beneficiary of the global trading system. Why change the rules of a game we are winning?

Still, national pride dies hard.

How soon will the trade war end? Does China want to help Donald Trump get elected in 2020, or his opponent?

It looks like it is going to be a long slog.

May 13, 2019

Diary, Newsletter, Summary

Global Market Comments
May 13, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, OR A GAME OF CHICKEN),
(SPY), (TLT), (UBER), (BA), (SOYB)

The Market Outlook for the Week Ahead, or a Game of Chicken

Diary, Newsletter

In summarizing the global financial system today, I recall the classic fifties James Dean movie, Rebel Without a Cause. Two cars are racing towards a cliff and the chicken has to bail out first. But the chicken gets his jacket sleeve stuck on a door knob, and his car dives over the cliff and crashes and burns.

Thus, here we are entranced by the world’s two largest economies in a race towards a cliff, but this time, it’s an economic one. Will rational minds prevail, or will our leaders miscalculate and plunge the world into a Great Depression? In other words, will the crashing car land on us?

That’s what happened during the 1930s when after the 1929 stock market crash lead to tit for tat tariffs that eliminated economic growth for a decade. It was only after the massive defense spending of WWII that the slump ended. This time the script is playing out exactly the same way.

Certainly, the stock market believes in the rosier scenario. The Dow average only fell 1,278 points last week. In a real “NO DEAL” case, it would have given up the full 4,500 points it gained since December.

A prolonged trade war until the next election would take us well into a recession and back to down the 18,000 that prevailed before the last presidential election.

For the short term, the S&P 500 (SPY) is clearly gunning for the 200-day moving average at $275. That would take us down 6.78% from the recent high. I have been using soybean prices (SOYB) as an indicator of China trade negotiation success. It hit a seven-year low this morning.

It's all about trade talks all the time now and nobody has the slightest idea of what is coming next. So, I’ll sit back and wait until the Volatility Index (VIX) hits $30, or the (SPY) drops to $275 before entertaining another trade alert. Until then, I’ll maintain my 100% cash position.

I reach all these conclusions after two days of solid sleep, recovering from four days of bacchanalia at the SALT conference in Las Vegas. I'll write more about this when the market stops crashing long enough for me to write it up.

Long term followers of this letter are laughing because they recall that two years ago I predicted that the next bear market would start precisely on May 10 at 4:00 PM EST. That estimate was arrived at by an intricate calculation of the timing of a coming yield curve inversion and recession.

The S&P 500 (SPY) hit an all-time high of $295 on May 2 at 4:00 PM EST, seven trading days early. Who knew that it would be a Tweet that did it?

Uber went public last week, likely at an $82 billion valuation which sucked $10 billion out of the market. Not helping was a stock market crash and an Uber driver’s strike that spread from the US to London. After car operating expenses are taken out, drivers only net a paltry $5 an hour.

The Fed warned about high stock prices, and business borrowing is at an all-time high just two days before the market dumped. Maybe we should listen to our central bank?

US Job Openings soared in March, by a stunning 346,000 to 7.5 million. This is what tops look like.

Bonds exploded to the upside on stock market panic, as the world stampedes to “RISK OFF.” There’s a great (TLT) short sale setting up here, but not quite yet.

The US trade deficit hit a five-year low in March, down 16.2% to $20.7 billion. This is due to a big 23.7% jump in US exports to China, thanks to China’s massive economic stimulus program, not ours. But at what cost?

The Mad Hedge Fund Trader dumped its last position Monday morning and, as a result, was completely up 50 basis points on the week. You may have noticed that I have been stopping out of positions must faster than usual recently and now you know the reason why.

Global Trading Dispatch closed the week up 14.59% year to date and is down -1.13% so far in May. My trailing one-year retreated to +18.96%.

Mad Hedge Technology Letter gave back some ground with two new very short-term positions in Intuit (INTU) and Google (GOOG) which expire on Friday

Some 11 out of 13 Mad Hedge Technology Letter round trips have been profitable this year.

My nine and a half year profit rose slightly to +314.73%. With the markets in free fall, I am now 100% in cash with Global Trading Dispatch and 80% cash in the Mad Hedge Tech Letter. I’ll wait until the markets find their new range and then jump in on the long side.

The coming week will be pretty boring on the data front.

On Monday, May 13 at 11:00 AM, the April Survey of Consumer Sentiment is announced.

On Tuesday, May 14, 6:00 AM EST, the NFIB Small Business Index is out.

On Wednesday, May 15 at 8:30 AM, March Retail Sales are released

On Thursday, May 16 at 8:30 AM, Weekly Jobless Claims are published. March Housing Starts to come out at the same time.

On Friday, May 17 at 10:00 AM, March Consumer Sentiment is printed.

As for me, I will be flying back from Las Vegas over the weekend having attended the SALT conference and my own Mad Hedge Fund Trader strategy luncheon. The highlight of the week was listening to Woodstock veterans Credence Clearwater Revival. I’ll write more about it next week.

Good luck and good trading.

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

You Can’t Do Enough Research

May 3, 2019

Diary, Newsletter, Summary

Global Market Comments
May 3, 2019
Fiat Lux

Featured Trade:
(LAST CHANCE TO ATTEND THE LAS VEGAS MAY 9 GLOBAL STRATEGY LUNCHEON)
(APRIL 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (LYFT), (TSLA), (TLT), (XLV), (UBER),
(AAPL), (AMZN), (MSFT), (EDIT), (SGMO), (CLLS)

May 1 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Research

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader May 1 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: Your old target for the (SPY) was $292.80; we’re clearly above that now. What’s your new target and how long will it take to get there?

A: My new target on the S&P 500 (SPY) is $296.80. You’re looking at $295 on the (SPY), so we’re almost there. However, we’re grinding up too slowly so I can’t give you an exact date.

Q: Will Fed governor Jay Powell give in to pressure from Trump who wants him to drop rates? Does he have any sway over the process?

A: Officially he has no sway, but every day Trump is tweeting: “I want QE back, I want a 1% rate cut.” And if that happened, the economy would completely blow up—an interest rate cut with the market at an all-time high and 3.25% GDP growth rate would be unprecedented, would deliver a short term gain and long term disaster.

Q: What do you think about the Uber (UBER) IPO?

A: I wouldn’t touch it with a 10-foot pole—they’ve been cutting valuations almost every day. At one point they were going to value the company at $120 billion dollars, now they’re at $90 billion and they may even lower it from there. The last car sharing IPO (LYFT) dropped 33% from its high. I would stay away from all of the IPOs once they’re listed. The rule is: only buy these things when they’re down 50%. Warren Buffet never buys IPOs, nor do I.

Q: What do you think about buying or selling Lyft?

A: I would wait a couple of months for Lyft to find its true price. Then you’ll have something to trade against.

Q: Do you think the bad news is over on Tesla (TSLA)? Is it time to buy? Or is it going bankrupt?

A: The whole world knew that the electric car subsidy would be cut in January, so what customers did was accelerate their orders in the 4th quarter, which took us all the way up to $380 in the shares, and then created a vacuum in the Q1 of this year. It reported the first quarter last week—they were disastrous orders, and the company is cutting back overhead as fast as possible as if it’s going into a recession, which it kind of is. The question is whether or not sales will bounce back in Q2 with the smaller subsidy. I happen to think they will. But we may not see 2018 Q4 sales levels again until 2019 Q4.

Q: Why has healthcare (XLV) been so awful this year?

A: There’s an election next year and both parties promise to beat up on the healthcare industry with drug control pricing and other forms of regulation. Of course, the current president promised free competition in drug prices; but then he moved to Washington DC and found the drug industry lobby, and nothing was ever heard again on that front. It’s a very high political risk sector, but there is some great value at these levels in the healthcare industry in the long term. I’m about to start the Mad Hedge Biotech and Health Care newsletter imminently.

Q: Should I buy the (TLT) $120-$123 call spread now?

A: That's a very aggressive trade, I would wait and go with strikes for in the money, and then only on a big dip. Don’t reach for a trade when the market is at an all-time high.

Q: Should I be shorting Tesla down here?

A: Absolutely not, your short trade was at $380, $350, $330 and $300. Down here, you run the risk of a surprise tweet from Elon Musk causing the stock to go $50 against you. Buy the way, he’s already announced that he’s buying $10 million worth of shares in his next capital raise.

Q: What do you think about CRISPR stocks long term, like Editas Medicine (EDIT), Sangamo Life Sciences (SGMO), and Cellectis (CLLS)?

A: These are probably the best bunch of 10 baggers long term. Short term they are afflicted with the same problems impacting all of healthcare—promises of regulation and price control on all of their products ahead of an election. So, hold for the long term; short term I’d only be buying the really big dips. Did I mention that I’m about to start the Mad Hedge Biotech and Health Care newsletter imminently?

Q: Is your May 10th market top forecast still good?

A: Well we’re getting kind of close to May 10th. I made this prediction based on an inverting yield curve two years ago. However, that target did not anticipate interest rates topping out for the 10-year US Treasury bond at 3.25%. Nor did it consider the Fed canceling all interest rate hikes for the year. Without the artificial stimulus, the market would certainly have already rolled over and died. That said, I still have a week to go.

Q: Should I be selling my long term holds in the FANGS, like Apple (AAPL), Amazon (AMZN), and Microsoft (MSFT)?

A: For the long term, no. However, we know from December that these things can get hit with a 40% drawdown at any time. As long as you can handle that, they always bounce back.

Q: What will happen to Venezuela? Any trades?

A: The only related trades would be in the oil market (USO). If we get a coup d’ etat which installs a new pro-American president, which could be at any time, that could lead to a selloff in oil for a couple of days as 1 Million barrels of crude per day come back on the market, but probably no more than that.

Q: With current national debt and budget deficits, when will interest in gold kick in?

A: Very simple: when the stock market goes down, you want to buy gold. It’s the hedge that everyone will chase after, and inflation is just around the corner.

Q: Do you need me to place any Kentucky Derby bets?

A: Me being the cautious guy I am, I pick the horse with the best odds and then I bet him to show. That almost always works.

Q: What about pot stocks?

A: I’ve never liked them very much; after all, how hard is it to grow a weed? The barriers to entry are zero. All of these pot companies coming up now are not really pot stocks as much as they are marketing companies, so you’re buying their distribution capability primarily. That said, I’m having breakfast with the CEO of a major pot company next week, so I’ll be writing about that once I get the inside scoop.

Q: Will the Fed be the non-event?

A: Yes, as stated in the Mad Hedge Hot Tips this morning, it will be a non-event and the news is due out in about an hour.