Global Market Comments
September 25, 2023
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE SINGULARITY IS HERE!)
(SPY), (TLT), (MSFT), (TSLA), (USO), (AMZN)
Posts
While changing planes at Heathrow airport in London last week, my partners in artificial intelligence graciously came out to join me for lunch over some of the awful food there. I can’t tell you who they are, but if I did you would fall out of your chair.
Whenever someone gets a lead in AI applications these days, mum’s the word. There’s no point in giving the competition a leg up, let alone a commanding lead. What they told me was incredibly exciting, but also terrifying. Suffice it to say that you ain’t seen nothing yet.
2023 is probably the last year when mere humans will be able to identify what’s real and what isn’t. The Turing Test, by which machines become indistinguishable from man, laid out by Dr. Alan Turing in 1950, has been conquered. Dr. Ray Kurzweil got it all wrong. We are not going to have to wait until 2040 for the Singularity to take place, whereby man and machine become one (click here for the link).
It’s happening right now.
It seems that these days. you spend half of your day proving to robots that you’re not a robot. Let me tell you that it’s about to get a lot worse. Lately, I have been irritatingly failing these tests more often because I can’t see the part of a bicycle hiding in a corner of the box next door. It won’t be long before we are working for these robots.
That could be a good thing because robots lack human flaws, like abusing their employees, getting drunk, failing to show up for work, and demanding more pay. What they WILL do is make you work FASTER, as the employees at Amazon (AMZN) found out, where workplace accidents and exhaustion at distribution centers are running rampant. Some workers can only handle six weeks of employment at a time.
It turns out that Elon Musk was the initial founding investor in ChatGBT, pumping in $1 billion in seed capital. When you’re the richest man in the world, you can do that sort of thing.
But Musk had a great falling out in 2021 when management refused to accept his absolute control of their AI in exchange for more money. That led to ChatGPT’s sale to Microsoft (MSFT) for $13 billion, a figure which, in retrospect, seems a pittance given the $1 trillion in value it is expected to create (so buy (MSFT).
By the way, ChatGPT refers to Generalized Preprogrammed Transformers in a homage to the cartoon series. That’s how nerdy these people are.
In any case, a huge conflict of interest had arisen with Tesla’s own AI efforts. One proof of this is that my own monthly insurance rates with Tesla keep going down, now at an unbelievably low $204 a month for a $165,000 vehicle.
It’s not that I’m a better driver. At my age, I’m probably getting worse. It's because the CAR keeps getting smarter, reducing the chance of an accident and therefore the risk to Tesla’s insurance division. By the way, notice how well Tesla shares have been outperforming the market lately.
Insurance industry watch out! You are about to get disrupted.
What is especially scary is that a presidential election will take place next year just when AI is hitting its stride. In 2016, many thought that the Access Hollywood videotape would make Donald Trump unelectable.
Everyone believed the video was real, but while half the voters were outraged, the other half said that’s just Trump being Trump and he got elected. If that video were released today, only half would believe it’s real while the other half would think it’s a deep fake produced by the opposition.
The possibilities boggle the mind, with multiple deep fakes already gaining airtime for next year’s primaries.
There isn’t much to say about stocks these days except that the grand finale for the current correction is fast approaching.
The UAW strike won’t cause the stock market to crash. But add it in with a prolonged government shutdown, sharply rising interest rates, and recessions in our biggest export markets in Europe and China, and suddenly the short-term downside argument becomes a lot more persuasive.
If you DO need convincing, look no further than my Mad Hedge AI Market Timing Index. It decisively broke 50 on Friday and plunged all the way down to 36. Finally, after a tortuous six months of doing nothing, we are starting to see some value in the market.
Whenever I go through periods of issuing no trade alerts for a prolonged period because the risk/reward is terrible, I get a lot of complaints from customers. After all, who wouldn’t want more trade alerts with a 90% success rate? The only way you achieve that success rate is to stay out of markets when they suck, as in now. Lately, I have noticed on down days, I get absolutely no complaints AT ALL.
I will end this dissertation by telling you a funny story. The last time I landed at San Francisco Airport, I grabbed an Uber cab home. As we departed the airport, I noticed a rolled set of plans on the floor forgotten by the previous passenger. I pointed this out to the driver, but he was from China and didn’t speak English.
So I opened up the plans and called the phone numbers listed in the key. First, I tried the University of California at San Francisco, whose name was clearly marked at the top. No luck there. The university is just too big.
Then I tried the printing company in Berkeley that produced the plans. I asked for the customer’s cell phone number, but the printer said they never released confidential client information. After some prodding, I convinced him to call his own customer and tell him I was headed back to the gate where he debarked with the plans (I can be very convincing).
By now, I was 20 minutes away from the airport, so I had ample time to examine what I had chanced on. It turns out I had blueprints of the human brain showing 100 sites where it can be connected directly to the Internet, ranking them by transmission efficiency. The owner was headed to Los Angeles to make a presentation to fellow scientists and some venture capital investors.
Yikes, I thought!
When we pulled up to the gate, there was a man looking like he had come out of central casting for the role of “scientist”, beard, glasses, and all. He was very grateful and then disappeared into the crowd running for his plane. Yes, I know it sounds like the beginning of a science fiction thriller.
I just thought you’d like to know. Yes, it’s just another day in the life for me.
So far in August, we are down -4.70%. My 2023 year-to-date performance is still at an eye-popping +60.80%. The S&P 500 (SPY) is up +17.10% so far in 2023. My trailing one-year return reached +92.45% versus +8.45% for the S&P 500.
That brings my 15-year total return to +657.99%. My average annualized return has fallen back to +48.15%, some 2.50 times the S&P 500 over the same period.
Some 41 of my 46 trades this year have been profitable.
The Most Important Thing That Powell Didn’t Say in Fed press conference is that quantitative tightening, or QT, continues. That drains $1 trillion a year from the financial system through bond sales until 2031 to get the Fed balance sheet down to zero. It is a negative for bonds….and the economy. The market is fixated on the 0.25% he did raise on interest rates.
UAW Strike Expanded on Friday, adding 38 new plants to the work stoppage. It’s death by a thousand cuts. The Big Three may respond with lockouts to drain union funds. Factories in Mexico are looking better every day. Elon Musk is laughing.
Industrial Production Jumps 0.4% in August, in another sign that the US has dodged the recession bullet. It’s one of the strongest numbers of the year. Capacity Utilization also rose to a high 79.7%.
Will a Government Shutdown Finally Drive Stocks Downward? Chaos rules supreme in the House of Representatives where there is a major effort to shut down the US government. Speaker Kevin McCarthy risks getting fired if he allows a spending bill to go through with Democratic support. It’s the result of a devil’s bargain made with his right wing to land the job in January. Will an impeachment inquiry into Biden be enough to placate them?
Cathie Woods’ New Take on Tesla (TSLA). As one of the earliest investors in Tesla, along with myself, it pays to listen to Cathie Woods talk about the stock. The company is headed from a current market valuation of $845 billion to $5 trillion, with two-thirds of the growth coming from its autonomous driving technology, a $15,000 upgrade. AI sold as software-as-a-service has an 80% profit margin compared to only 20%-30% for the EV business. Cathie’s bull case is $2,000 in five to ten years and her bear case is that the stock only reached $1,400. Teslas have a 40% lower accident rate than ICE cars, thanks to AI, so take the human out of the driving formula.
Oil (USO) Hits New 2023 High, with gasoline topping $5.00 a gallon in many states. There is no oil shortage or supply disruptions. This is pure price gouging, with Saudi Arabia and Russia cutting supplies by 5 million barrels/day since June and American oil companies riding on their coattails. The move coincided with a sudden and unexpected improvement in the US economic outlook, increasing demand. Too late to play on the long side here, with prices up 40% from the May lows.
National Debt (TLT) Tops $33 Trillion, or $100,000 per man, woman, and child. Not great news for bonds, as new issuance is swamping the markets. The debt has risen by 50% since 2019. Republicans want Democrats to spend less, while Democrats want Republicans to cut their spending.
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, September 25, the Chicago Fed National Activity Index is out.
On Tuesday, September 26 at 3:00 PM EST, the S&P Case Shiller National Home Price Index is released. We also get New Home Sales.
On Wednesday, September 27 at 2:30 PM, the US Durable Goods is published.
On Thursday, September 28 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the final print for Q2 GDP.
On Friday, September 29 at 2:30 PM, the Personal Income & Spending is published. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, this is not my first Russian invasion.
Early in the morning of August 20, 1968, I was dead asleep at my budget hotel off of Prague’s Wenceslas Square when I was suddenly awoken by a burst of machine gun fire. I looked out the window and found the square filled with T-54 Russian tanks, trucks, and troops.
The Soviet Union was not happy with the liberal, pro-western leaning of the Alexander Dubcek government so they invaded Czechoslovakia with 500,000 troops and overthrew the government.
I ran downstairs and joined a protest demonstration that was rapidly forming in front of Radio Prague trying to prevent the Russians from seizing the national broadcast radio station. At one point, I was interviewed by a reporter from the BBC carrying this hulking great tape recorder over his shoulder, as I was the only one who spoke English.
It seemed wise to hightail it out of the country, post haste, as it was just a matter of time before I would be arrested. The US ambassador to Czechoslovakia, Shirley Temple Black (yes, THE Shirley Temple), organized a train to get all of the Americans out of the country.
I heard about it too late and missed the train.
All borders with the west were closed and domestic trains shut down, so the only way to get out of the country was to hitchhike to Hungary where the border was still open.
This proved amazingly easy as I placed a small American flag on my backpack. I was in Bratislava just across the Danube from Austria in no time. I figured worst case, I could always swim it, as I had earned both, the Boy Scout Swimming, and Lifesaving merit badges.
Then I was picked up by a guy driving a 1949 Plymouth who loved Americans because he had a brother living in New York City. He insisted on taking me out to dinner. As we dined, he introduced me to an old Czech custom, drinking an entire bottle of vodka before an important event, like crossing an international border.
Being 16 years old, I was not used to this amount of high-octane 40-proof rocket fuel and I was shortly drunk out of my mind. After that, my memory is somewhat hazy.
My driver, also wildly drunk, raced up to the border and screeched to a halt. I staggered through Czech passport control which duly stamped my passport. I then lurched another 50 yards to Hungary, which amazingly, let me in. Apparently, there is no restriction on entering the country drunk out of your mind. Such is Eastern Europe.
I walked another 100 yards into Hungary and started to feel woozy. So, I stumbled into a wheat field and passed out.
Sometime in the middle of the night, I felt someone kicking me. Two Hungarian border guards had discovered me. They demanded my documents. I said I had no idea what they were talking about. Finally, after their third demand, they loaded their machine guns, pointed them at my forehead, and demanded my documents for the third time.
I said, “Oh, you want my documents!”
I produced my passport, and when they got to the page that showed my age, they both started laughing.
They picked me and my backpack up and dragged me back to the road. While crossing some railroad tracks, they dropped me, and my knee hit a rail. But since I was numb, I didn’t feel a thing.
When we got to the road, I saw an endless stream of Russian army trucks pouring into Czechoslovakia. They flagged down one of them. I was grabbed by two Russian soldiers and hauled into the truck with my pack thrown on top of me. The truck made a U-turn and drove back into Hungary.
I contemplated my surroundings. There were 16 Russian Army soldiers in full battle dress holding AK-47s between their legs and two German Shepherds all looking at me quizzically. Then I suddenly felt the urge to throw up. As I assessed that this was a life-and-death situation, I made every effort to restrain myself.
We drove five miles into the country and stopped at a small church. They carried me out of the truck and dumped me and my pack behind the building. Then they drove off.
The next morning, I woke up with the worst headache of my life. My knee bled throughout the night and hurt like hell. I still have the scar. Even so, in my enfeebled condition, I realized that I just had one close call.
I hitchhiked on to Budapest, then to Romania, where I heard that the beaches were filled with beautiful women. My Italian let me get by passably in the local language.
It all turned out to be true.
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
September 20, 2023
Fiat Lux
Featured Trade:
(FRIDAY, OCTOBER 31 MIAMI, FLORIDA GLOBAL STRATEGY LUNCHEON)
(WHY I HAVE BECOME SO BORING),
(SPY), (QQQ), (IWM), (AAPL), (TSLA),
(TACKLING THE INFLATION MYTH),
(AAPL), (GOOG), (FB)
I have recently received a few complaints from readers that I have become boring. I have to confess that they are right.
I am not a person who boredom comes to easily. I’m the guy who climbed the Matterhorn, crossed the Sahara Desert on the back of a camel, and went to surfing school.
And that’s just what I did last year! Oh, and I’m also headed for the world’s hottest combat zone.
However, I do admit that I have become boring on the trading front.
If I get a request for one thing more than any other, it is for recommendations of stocks that will rise by at least ten times over the next ten years.
Readers want to know the names of shares of companies that they can just buy and forget about, and then retire rich as Croesus a decade down the road.
What could be more reasonable?
I happen to have sent out quite a few of these over the years.
Whenever I attend my global strategy luncheons around the world, someone inevitably thanks me for my effort to cajole them into buying Tesla (TSLA) at a split-adjusted $2.50. Nothing seemed more questionable at the time (2010) in the wake of the Great Recession and financial crisis.
At my New York luncheon in June, a guest pressed a one-ounce American Gold Eagle into my hand and said thanks for NVIDIA (NVDA). He bought it at $15 and rode it all the way up to $450.
He then doubled his money by jumping into Apple (AAPL) at $56 (on a split-adjusted basis) and rode the express train to $200, again after my pleading.
Then there was the reader who offered me his mega yacht in the Mediterranean for a week for free because I virtually forced him to buy Moderna (MRNA) just before the pandemic before it rocketed 50X. It was nice cruising the Mediterranean last summer on his advice.
It’s not that I have suddenly become averse to dishing out ten-baggers. I have not grown weary in my old age either, although I confess to finding those erectile dysfunction and baldness ads on TV more fascinating by the month.
No, the real problem is that the stock markets are just not offering anything right now. And here is where I give you some great trading tips.
When stock markets are rising and financial assets are generally in “RISK ON” mode, you want to own single stocks.
Individual shares have “betas”, or a propensity to move, that is far greater than indexes. If an index rises 10%, some of its individual components can move anywhere from 15%-100%.
When stock markets are in correction (down) or consolidation (sideways) mode, as we are now, the higher betas of stocks work against you. They fall faster than the index.
Therefore, in flat and falling markets you want to trade indexes, like the S&P 500 big cap index (SPY), the NASDAQ technology index (QQQ), and the Russell 2000 small cap index (IWM). Better yet, don’t execute any trades at all, especially if you are already up 60% on the year.
Keep your powder dry. A dollar at a market bottom is worth $10 at a market top.
Your mistakes trading these relatively nonvolatile (read boring) instruments earn you less money. The risk/reward for short-term trading right now is terrible.
Therefore, by trading stocks in up markets and indexes only in down markets, you create an inbuilt bias in your portfolio that works in your favor.
A classic example of how this works was to see the market reactions to corporate earnings announcements in July. In these risk-averse times, winners were rewarded modestly, but losers were taken out to the woodshed and beaten senseless.
Look at the recent charts for Apple (AAPL), Tesla (TSLA), and Disney (DIS) and you’ll see what I mean. I bet the owners of these companies wish they had been trading indexes in August, which barely moved. Is 3% the new 10% correction?
These are all fundamentally great companies for the long term. But when people run for cash, they will often sell whatever has the most profit, and all three of these names met that standard. Investors were, in effect, raiding the piggy bank.
Of course, you can try and be clever and go long stocks in rising markets, and then sell them short in falling ones.
My half-century of experience tells me that this is easier said than done.
While many managers will promise you this bit of investing in gymnastics, very few can actually deliver. Most professionals are unable to time markets with this precision, let alone individuals.
Needless to say, don’t try this at home.
What? Me Boring?
Global Market Comments
September 13, 2023
Fiat Lux
Featured Trade:
(SEPTEMBER 29 ZERMATT SWITZERLAND STRATEGY LUNCHEON)
(TRADING DEVOID OF THE THOUGHT PROCESS)
(SPY), (INDU), (TLT), (USO)
(ON EXECUTING TRADE ALERTS)
Global Market Comments
September 6, 2023
Fiat Lux
Featured Trade:
(HOW TO MAKE A KILLING IN TESLA)
(TESLA), (SPY), (VIX)
There is no doubt in my mind that a major leg up in Tesla shares is coming, possibly soon. That’s because of the increasing number of “Bigfoot” type sightings of the Cybertruck, the most revolutionary new vehicle launch in a decade.
Social media is increasingly being populated by links to secret videos, drone pictures, charging station sightings, and insider leaks.
The car will me made of flat stainless-steel panels to cut costs on those expensive curves. The windows are armor-plated. It has a towing capacity of 14,000 pounds, can accelerate from zero to 60 mph in 2.9 seconds, and boasts a 500-mile range. It moves the auto industry to a 48-volt platform to save on copper costs. You can have all of this starting at $60,000.
To get on the waiting list, please click here. But you may have to wait for two years to get one. You’ll be somewhere in the 2 million waiting list.
Not only did I pay for this year’s summer vacation with this year’s Tesla profits, and it was not exactly a cheap one, but I paid for next year’s as well. I’m taking a Queen Mary owner’s suite, Orient Express, Hotel Cipriani in Venice kind of vacation.
I’m about to make a lot more.
I get most of my ideas for trade alerts from my own trading. They’re just infinitely more aggressive than the ones I send to the Mad Hedge Trade Alert service. I am much more careful with client money than my own, as I hate losing other people’s money more than anything.
I would never recommend what I did below for mere mortals. If I did, I’d probably end up in jail.
One great high risk leveraged strategy is to sell short Tesla puts outright. All my puts that I sold short this month for $12-$16 are expiring worthless.
It’s not for the faint of heart and it takes a half-century of risk tolerance building to do this kind of trading. Never short more puts than you can afford to buy the stock.
There were a few things required to do such a trade.
Since no one ever gets the absolute bottom, the initial outcome of a large leveraged position is a big loss. Most of you would stop out of the position when this happens. I kept doubling up.
For I had the power of my own convictions.
By selling short puts, I was more than happy to buy Tesla stock lower down if the stock went against me. Using margin, I could buy a lot of stock.
Now that’s a trade!
When I added this position, I thought it highly unlikely that I would get to buy Tesla stock at low prices for the following reasons:
1) The stock market was oversold.
2) Tesla was even more oversold, having fallen 30%.
3) A classic “cup and handle” formation was setting up on the charts. Upside breakout day was July 24.
4) The Volatility Index (VIX) failed to confirm the selloff.
5) After sitting in the sidelines investors had accumulated massive amounts of cash.
6) We are about to move into strongly positive seasonals.
7) Tesla is getting ready to buy back its own stock.
8) Tesla bears, and there are always a lot of them out there, had just freshly topped up their short positions, leaving the stock ripe for a short squeeze.
9) Tesla is one of the most volatile stocks in the market, with option implied volatility regularly hitting 100%. By comparison, the S&P 500 (SPX) sits at a positively boring 20%.
10) Fears of a deep recession were wildly overblown.
The real cherry on top of the cake was the $370 billion Biden Climate bill, which no one expected, came totally out of the blue, and had a ballistic effect on Tesla shares. Tesla is the overwhelming beneficiary of this legislation.
They might as well have called it the “Tesla shareholder enrichment plan.”
It’s easy to commit to paying $245 for a stock that you think someday will be worth $10,000. Tesla is currently the fastest-growing car company in the world with a near global monopoly in EVs. Its market share is 66%. The best Henry Ford could do with Ford Motors (F) in the 1910s was a US market share of 75%.
So, I will probably be doing a lot more of these. I don’t need the money; I just love winning.
You’ll be the first to know.
Tesla Just Bought Me Another Tesla
Global Market Comments
August 28, 2023
Fiat Lux
Featured Trades:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE FAILED RALLY)
(SPY), (TLT), (FCX), (TSLA), (AAPL), (UPS)
CLICK HERE to download today's position sheet.
Market’s tried to rally last week….and failed.
The reason, of course, is Fed governor Jay Powell’s comments that interest rates may have to stay higher for longer. He seems hell-bent on reaching his 2.0% inflation target, down from the current 3.2% and well off the 9.0% high.
That puts off any rally in the interest rate-sensitive sectors, which is almost everything, by three to six months. But then, markets discount fundamentals by six to nine months in advance.
You do the math.
That means a monster rally in all financial assets should ensue sometime in September or October that could last a decade.
What a surprise!
The possibility that the next rally will be explosive is bereft of doubt. A record $5.6 trillion is now sitting on the sidelines ready to dive into risk assets on the slightest pretense. We might be in for another January 4 repeat. That includes funds in money market funds, overnight bank deposits, 90-day T-bills, IRAs, 401Ks, and cash under the mattress.
It's all very reminiscent of 1982 when we enjoyed the exact demographic tailwind as we are enjoying now. An 18-year rally followed and took the Dow Average up 20-fold.
The United States has by far the strongest major economy in the world for a reason. A 3.5% Headline Unemployment Rate, 5.25% overnight interest rates, and a 3.2% inflation rate are supposed to be mathematically impossible, yet here we are.
Did I mention that 2024 is an election year? That's when the economic data magically improve, as they have during every election over the past 200 years. Stock investors notice this.
As I spent all day every day and well into the night conducting research, I noticed a curious development. All the bears seem to live on the East Coast, while those in Silicon Valley are the most bullish I’ve ever seen.
That’s because we here in California see the hyper-accelerating technology in every meeting, with every human contact, and right on our own doorsteps. We are the beta testers for the technology that the rest of the country and the world won’t see for a few years.
While the nation is debating climate change, there is a “Robot War” taking place in San Francisco over how rapidly to permit the expansion of the self-driving taxi fleet, now capped at 1,000.
The fact that their accident rate has been near zero, far lower than human-driven vehicles, is a major point in their favor. I’m getting used to seeing no driver in the car next to me.
Walked into a McDonald's or a Taco Bell lately? It’s all computers. My theory as to why UPS agreed to such a generous 40% pay increase over five years for 340,000 workers is that when the next contract comes up for negation, they will have gone all robotic by then.
Autonomous driving, artificial intelligence, quantum computers are all still in their infancy and are in no way reflected in share prices.
In the meantime, keep massaging those 5.25% 90-day T-bill rates and enjoy your summer vacation. But the time to go all in with risk is approaching.
So far in August, we are down -4.70%. My 2023 year-to-date performance is still at an eye-popping +60.80%. The S&P 500 (SPY) is up +17.10% so far in 2023. My trailing one-year return reached +92.45% versus +8.45% for the S&P 500.
That brings my 15-year total return to +657.99%. My average annualized return has fallen back to +48.15%, some 2.50 times the S&P 500 over the same period.
Some 41 of my 46 trades this year have been profitable.
The Oracle Speaks! Fed Governor Jay Powell might as well have been reading me the New York telephone book when he indicated that “Interest rates may have to stay higher for longer” during his Jackson Hole speech. The Fed only knows two speeds: too slow and too fast. The bears are coming out of the woodwork once again. Look for lower lows to buy into for all asset classes. Start positioning yourself for a monster yearend rally.
Markets Will Snore Until September 1 Jobs Report. The August Nonfarm Payroll report is expected to come in at a weak 175,000. Enjoy the last week of summer.
The US Budget Deficit is Climbing Once Again, after a super spike in 2020. Recent environmental spending has added another trillion dollars to the bill. That will seem a bargain if we can’t slow down exploding global temperatures….quickly. It was 120 degrees in Italy this summer. Mama Mia!
Has Apple (AAPL) Topped Out? With no new products on the horizon and interest rates rising, the bull market in Apple shares may have called it a day at last month’s 200 peak. As with the rest of the “Magnificent Seven,” there was a giant pull forward of performance into the first half of this year. All of the stock’s gains have been through multiple expansions, regaining much of what was lost in 2022.
Existing Home Sales Drop Again, demolished by record-high mortgage rates. July saw sales decline by 2.2% to a six-month low on sales of 4.15 million units. Home resales, which account for a big chunk of U.S. housing sales, fell 16.6% on a year-on-year basis in July.
Ten-Year Treasuries Hit New 16-year High, at 4.32%. We could be approaching a bond-selling climax around Jay Powell’s Jackson Hole Speech on Friday and the buying opportunity of the decade.
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, August 28 at 8:00 AM EST, the Dallas Fed Manufacturing Index is out.
On Tuesday, August 29 at 8:30 AM, the US JOLTS Job Openings Report is released.
On Wednesday, August 30 at 2:30 PM, the ADP Employment Change is published.
On Thursday, August 31 at 8:30 AM, the Weekly Jobless Claims are announced. Personal Income & Spending are also announced.
On Friday, September 1 at 2:30 PM, the Nonfarm Payroll Report for August is published. At 2:00 PM, the Baker Hughes Rig Count is printed.
As for me, The Diary of a Mad Hedge Fund Trader is now celebrating its 15th year of publication.
During this time, I have religiously pumped out 3,000 words a day, or 18 newsletters a week, of original, independent-minded, hard-hitting, and often wickedly funny research.
I spent my life as a war correspondent, Marine Corps combat pilot, Wall Street trader, and hedge fund manager, and if you can’t laugh after that, something is wrong with you.
I’ve been covering stocks, bonds, commodities, foreign exchange, energy, precious metals, real estate, and even agricultural products.
You’ve been kept up on my travels around the world and listened in on my conversations with those who drive the financial markets.
I also occasionally opine on politics, but only when it has a direct market impact, such as with the recent administration's economic and trade policies. There is no profit in taking a side.
The site now contains over 20 million words, or 30 times the length of Tolstoy’s epic War and Peace.
Unfortunately, it feels like I have written on every possible topic at least 100 times over.
So, I am reaching out to you, the reader, to suggest new areas of research that I may have missed until now which you believe justify further investigation.
Please send any and all ideas directly to me at support@madhedgefundtrader.com/, and put “RESEARCH IDEA” in the subject line.
The great thing about running an online business is that I can evolve it to meet your needs on a daily basis.
Many of the new products and services that I have introduced since 2008 have come at your suggestion. That has enabled me to improve the product’s quality, to your benefit. Notice how rapidly my trade alert performance is going up, now annualizing at +47% a year.
This originally started out as a daily email to my hedge fund investors giving them an update on fast market-moving events. That was at a time when the financial markets were in free fall, and the end of the world seemed near.
Here’s a good trading rule of thumb: Usually, the world doesn’t end. History doesn’t repeat itself, but it certainly rhymes.
The daily emails gave me the scalability that I so desperately needed. Today’s global mega enterprise grew from there.
Today, the Diary of a Mad Hedge Fund Trader and its Global Trading Dispatch is read in over 140 countries by 30,000 followers. The Mad Hedge Technology Letter, the Mad Hedge Biotech & Health Care Letter, Mad Hedge AI, and Jacquie’s Post also have their own substantial followings. And the daily Mad Hedge Hot Tips is one of the most widely read publications in the financial industry.
I’m weak in distribution in North Korea and Mali, in both cases due to the lack of electricity. But that may change.
One can only hope.
If you want to read my first pitiful attempt at a post, please click here for my February 1, 2008 post.
It urged readers to buy gold at $950 (it soared to $2,200), and buy the Euro at $1.50 (it went to $1.60).
Now you know why this letter has become so outrageously popular.
Unfortunately, I also recommended that they sell bonds short. I wasn’t wrong on that one, just early, about eight years too early.
I always get asked how long will I keep doing this?
I am already collecting Social Security, so that deadline came and went. My old friend and early Mad Hedge subscriber, Warren Buffet is still working at 92, so that seems like a realistic goal. And my old friend, Henry Kissinger, is still hard at it at 100 years old.
Hiking ten miles a day with a 50-pound pack, my doctor tells me I should live forever. He says he spends all day trying to convince his other patients to be like me, and the only one who actually does it is me.
The harsh truth is that I don’t know how to NOT work. Never tried it, never will.
The fact is that thousands of subscribers love me for what I do, pay for me to travel around the world first class to the most exotic destinations, eat in the best restaurants, fly the rarest historical aircraft, then say thank you. I even get presents (keep those pounds of fudge and bottles of bourbon coming!).
Given the absolute blast I have doing this job; I would be Mad to actually retire.
Take a look at the testimonials I get only on an almost daily basis and you’ll see why this business is so hard to walk away from (click here for those).
In the end, you are going to have to pry my cold dead fingers off of this keyboard to get me to give up.
Fiat Lux (let there be light).
Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Here Comes the Heat-Induced Recession.
Large parts of the UK economy are shutting down today, including the entire rail system, due to extreme heat. The temperature in London today is expected to top a record 107 degrees. Much of Britain’s infrastructure is simply not designed to operate at these temperatures.
France is worse, with temperatures there reaching 113 degrees. It will not be the last time that temps get this high. As for Southern Italy, it has become uninhabitable by humans at 116 degrees.
That brings the prospect that weather forecasts may become a much more important aspect of stock market predictions than they have in the past. Just like we have to now include new covid cases and deaths as part of our daily calculation, so might the high temperature of this day.
The temperature has in effect become a new economic indicator.
As for me, I am high in the Alps at 7,000 feet where it is a much more comfortable 80 degrees. The rivers are roaring below me with record glacier melts, tar on the roads is melting, and it is too hot to hike. With ice disappearing, there is talk of the Matterhorn breaking apart.
But at least I can catch up on my paperwork. The trouble is, so is everyone else and my Internet speed has slowed from 45 megabytes per second to an unusable 10.
Below is an email I received from British Rail which I rode only last week.
Dear Customer,
You may be aware that Network Rail has urged people across the country to only travel if absolutely necessary on Monday 18 and Tuesday 19 July. This comes as a result of the extreme heat forecast for these two days.
On Monday and Tuesday, temperatures are expected to reach up to 42°C in London and the surrounding area, and the mid-30s in the western parts of our network. As rail temperatures can be up to 20°C higher than the air around them, there is a risk of them buckling in the extreme heat.
As a result, Network Rail will introduce speed restrictions across the network to minimize the force on the tracks and reduce the chance of buckling. These speed restrictions will, in turn, make journeys longer and we will introduce a reduced service on Monday and Tuesday in a bid to give our customers certainty on what will run.
The speed restrictions will particularly affect our mainline services, with long-distance services to Exeter, Salisbury, Bournemouth, Weymouth, Southampton, and Portsmouth most likely to be impacted.
Service changes are likely to appear in journey planners at short notice, so anyone who chooses to travel despite the warnings on Monday or Tuesday is urged to check their journey before setting off and to expect last-minute delays and cancellations.
If you have no choice but to travel, you are urged to carry water with you, cover up, and wear sunscreen when traveling. Find out more about traveling in hot weather here.
If you choose to delay your travel, please note that the original ticket restrictions will still apply. If you are using an Advance Purchase ticket, please travel as close to the original departure time as possible or make use of Book With Confidence.
Thank you for your patience and understanding.
Yours sincerely,
South Western Railway
