(TBT) Archives - Page 9 of 28 - Mad Hedge Fund Trader

December 15 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the December 15 Mad Hedge Fund Trader Global Strategy Webinar broadcast from the safety of Silicon Valley.

Q: With interest rates going up, would it make sense to short heavily indebted companies as a class?

A: Yes it does; those would be old-line industrials and auto companies with very heavy debts. Technology companies essentially have no debt unless they’re startups. So yeah, that’s a good idea; unless of course inflation is peaking right now, which it may be if you solve these supply chain problems, and it becomes evident that retailers overordered to beat the supply chain problems and now have a ton of excess inventory they can’t meet—then the inflation plays will crash. So, not a low-risk environment right now. No matter where you look, you’re screwed if you do, you’re screwed if you don't. So that is an issue to keep in mind.

Q: What do you think of Freeport McMoRan (FCX) short-term?

A: Short term, (FCX) only sees the Chinese (FXI) real estate crisis, which is getting worse before it gets better and could bring a complete halt to all known construction in China. The government is forcing the real estate companies there to run at losses in order to bring the bottom part of their society into the middle class with houses in third and fourth-tier cities. Long term, as annual electric car production goes from a million cars a year to 25 million cars a year and each car needs 200 lbs. of copper, we have to triple world production practically overnight to accommodate that. That can’t happen, therefore that means much higher prices. If you’re willing to take some pain, picking up freeport McMoRan in the low $30s has to be the trade of the century.

Q: Do you see a Christmas rally or a bigger correction?

A: Rally first. Once we get the Fed out of the way today, we could get our Christmas rally resumed and go to new highs by the end of the year. But, January is starting to look a little bit scary with all the unknowns going forward and massive long positions. January could be okay as hedge funds put positions back on in tech that they’re dumping right now. If they don’t show up…Houston, we might have a problem.

Q: Thoughts on the iShares 20 Plus Year Treasury Bond ETF (TLT) Dec 2022 $150-$155 vertical bear put spread?

A: Since I'm in low-risk mode, I would go up $5 or $10 points and not be greedy. Not being greedy is going to be one of the principal themes of 2022 therefore I’m recommending that people do the $160-$165 or even the $165-$170, which still gives you a 30% return in a year, and I think next year this will be seen as a fabulous return.

Q: What about the $100,000 target for Bitcoin (BITO) by the end of the year?

A: That’s off the table thanks to the Fed tightening and Omicron triggering a massive “RISK OFF” and flight to safety move. Non-yielding instruments tend not to do well during periods of rising interest rates, so gold along with crypto is getting crushed.

Q: What will happen in the case of a black swan event in early 2022, like Russia invading Ukraine?

A: Market impact for that would be a bad couple of days, a buying opportunity, and then you’d want to pile into stocks. Every geopolitical event that’s happened in the last 20 years has been a buying opportunity for stocks. Of course, I would feel bad for the Ukrainians, but it’s kind of like Florida seceding from the US, then the US invading Florida to take it back, and the rest of the world not really caring. Plus, it doesn’t help that their heavily nationalist post-coup government has some fascist tendencies. However, we could get global economic sanctions against Russia like an import/export embargo, which would hurt them and destroy their economy.

Q: Will the European natural gas shortage continue?

A: Yes because the Europeans are at the mercy of the Russians, who have all the gas and none of the economy. Therefore, they can export as much or as little as they want, depending on how much political control they’re trying to exert in Europe.

Q: Apple Inc. (AAPL) price target?

A: Well, my price target for next year was $200; we could hit that by the end of the year if we get a rally after the Fed meeting.

Q: 33% of the population is in collection status with personal debt, credit cards, etc—is that a harbinger of a 2008 crash?

A: No, it is a harbinger of excess liquidity, interest rates being too low, and lenders being too lax. However, we aren’t at the level where it could wipe out the entire economy like with defaulting on a third of all housing market debt in 2008.

Q: What should I do with my call spreads for Amazon.com, Inc. (AMZN)?

A: Well, November would have been a great sell. Down here, I’d be inclined to hold onto the spreads you have, looking for a yearend rally and a new year rally. But remember, with all these short-dated plays risk is rising, so keep that in mind.

Q: What do you think of AT&T Inc (T)?

A: The whole sector has just been treated horrifically; I don’t want to try to catch a falling knife here even though AT&T pays a 10% dividend.

Q: What about quad witching day?

A: Expect a battle by big hedge funds trying to push single stocks options just above or below strike prices. It’s totally unpredictable because of the rise of front-month trading, which is now 80% of all options trading with the participation of algorithms.

Q: Is the Alibaba Group Holding Limited (BABA) $230-$250 LEAP in June 2023 worth keeping?

A: I would say yes, I think the Chinese will come to their senses by then, and all the Chinese tech plays will double, but there’s no guarantee. That is still a high-risk trade.

Q: Does the US have an opportunity to export petroleum products?

A: The answer is yes, we are already a net energy exporter thanks to fracking. But, it is a multi-year infrastructure build-out to add foreign export destinations like Europe, which hasn’t bought our petroleum since WWII. Right now, almost all of our exports are going to Asia. No easy fixes here.

Q: Is Tesla Inc (TSLA) a buy at 935 down 300 in change?

A: Not yet; 45% seems to be the magic number for Tesla correction. We had one this year. And Elon Musk hasn’t quit selling yet, although I suspect he’ll end his selling by the end of the year because he’ll have met all his tax obligations for the year. He has to sell these options before they expire and are rendered useless. So that is what’s happening with Tesla, Elon Musk selling. And can you blame him? He almost worked himself to death making that company, time to spend some money and have a good time, like me.

Q: What if your Chinese company gets delisted?

A: Try to get out before it is delisted. Otherwise, the domicile moves to Hong Kong and you’ll have to sell equivalent shares there. I don’t know what the details of that are going to be, but the Chinese companies are trying to force companies to delist from the US and list in Hong Kong so they have complete control over what's going on. Also, I never liked these New York listings anyway because the disclosures were terrible, with Cayman Island PO Boxes and so on…

Q: Is the ProShares UltraShort 20+ Year Treasury (TBT) a good long-term position to hold?

A: It is to an extent—only if you expect any big moves up in interest rates, which I kind of am. This is because the cost of carry for (TBT) is quite high; you have to pay double the 10-year US Treasury rates, which is double 1.45% or about 2.90%, and then another management fee of 1%, so you have kind of a 4% a year headwind on that because of cost. Remember, if you’re short a bond, you’re short a coupon; if you’re double short a bond you’re short twice the coupon and you have to pay that and they take it out of the share price. But, if you’re expecting bonds to go down more than 4%, you’ll cover that and then some and I think bonds could drop 10-20% this year.

Q: What’s the difference between GBTC and BITO?

A: Nothing, both are Bitcoin plays that are tracking reasonably well. I prefer to go with the miners—the Bitcoin providers, that’s a selling-shovels-to-the-gold-miners play. They tend to have more volatility than the underlying Bitcoin, so that’s why I’m in (BLOK) and (MSTR) when I’m in it.

Q: What’s the best way to buy Crypto?

A: If you really want to buy Crypto directly, the really easy way is to go through one of the top crypto brokerage houses, and we’ve recommended several of those. Coinbase (COIN) is the one I’m in. It literally takes you five minutes to set up an account and you can instantly buy Bitcoin linked to your bank account.

Q: What are the fees like for Coinbase?

A: The fees at (COIN) are exorbitant only if you’re buying $10 worth of Bitcoin. If you’re buying like $1 million worth, they’re much, much smaller. But I recommend you start at $10 and work your way up as I did, and sooner or later you’ll be buying million-dollar chunks of Bitcoin which then double in three months, which happened to me this year.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.

Good Luck and Stay Healthy.

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

December 14, 2021

Diary, Newsletter, Summary

Global Market Comments
December 14, 2021
Fiat Lux

Featured Trade:

(THE UNITED STATES OF DEBT),
(TLT), (TBT), ($TNX)

December 9, 2021

Diary, Newsletter, Summary

Global Market Comments
December 9, 2021
Fiat Lux

Featured Trade:

(WHAT EVER HAPPENED TO THE GREAT DEPRESSION DEBT?),
($TNX), (TLT), (TBT)

December 3, 2021

Diary, Newsletter, Summary

Global Market Comments
December 3, 2021
Fiat Lux

Featured Trade:

(DECEMBER 1 BIWEEKLY STRATEGY WEBINAR Q&A),
(PYPL), (MA), (AXP), (SQ), (TLT), (TBT), (TSLA), (AAPL), (FB), (MSFT), (AA), (FCX), (BITO), (COPA.L)

November 22, 2021

Diary, Newsletter, Summary

Global Market Comments
November 22, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE WORST-CASE SCENARIO)
(BITO), (ETHE), (TLT), (TBT), (NVDA), (DE)

The Market Outlook for the Week Ahead, or The Worst-Case Scenario

Diary, Newsletter

In the investment business, you’re only as good as your last trade. If that is the case, that makes me a pretty worthless person in the wake of a record four stop-losses at the November 19 option expiration.

Days before, the market closed with all ten of our positions profitable. But the pandemic lockdown in Austria on Friday morning shattered those plans. Fears of a new Covid wave and another mini-recession send bonds soaring and interest rates crashing. That trashed financial stocks, where I had a heavy exposure.

If you work in the business long enough, you see a black swan on an options expiration day every five or ten years. This was our turn. As a result, we traded a double-digit gain for November for a moderate loss. That still leaves us with a heroic 80% gain for 2021 and 15 consecutive profitable months.

There is nothing to do but pick yourself up, dust yourself off, and go on to the next trade. I wouldn’t be surprised to see all of the Friday losses reversed in the coming weeks. Banks are still outrageously profitable and the cheapest sector in the market. If you have a six-month to one-year view, the action on Friday changed nothing.

You live by the sword, you die by the sword.

There was a lot going on Friday than just another Covid wave. November option expirations used to be a snore. But this year, brokerage firms have stampeded so many retail investors into the options markets where they make the most money that they have become major events.

Some 70% of all options trading now takes place in securities with less than two weeks to expiration. In the meantime, professional traders limit their personal accounts to long term LEAPS which are the subject of the Mad Hedge Concierge Service. Instead of rolling the dice for a 10% profit in a month, you get a very safe 100% return in a year.

Of course, while financials were getting wrecked, falling interest rates were acting as a steroid for tech stocks. (MSFT) and Google (GOOG) hit new highs for the year. Concierge members in my (ROM) LEAPS were rolling in clover.

The barbell strategy wins again!

Infrastructure Bill is signed on Monday, injecting another $1.2 trillion into the economy today. This assured the economy will keep booming through 2024. The bond market hates it, down $6.00 in three days. It adds another 3% to GDP over the next five years. Keep selling (TLT) on rallies.

Bitcoin Forks for the first some since 2017, making it much more competitive with Ethereum. It enables the lead crypto to use defi and third party apps. Miner Marathon (MARA) is raising a $500 million bond issue to buy Bitcoin. Keep buying (BITO) and (ETHE) on dips.

US Retail Sales roar, up 1.7% in October compared to 0.8% in September, far more than expected. Receipts for all items are rising. Higher wages are immediately translating into increased spending.

Builder Sentiment jumps, up 3 points to 83, according to the National Association of Homebuilders. A decade-long structural shortage of housing is a huge tailwind. Good luck hiring a contractor right now. The Midwest and the south are the leaders in demand.

Dollar hits 16-Month High, on the strength of yesterday’s red hot Retail Sales. It means higher interest rates soon, which is great for the buck. Currencies with the fastest rising interest rates are always the strongest.

NVIDIA kills it, with revenues up 50% YOY and earnings up 60%. It’s well on the way to becoming the next trillion-dollar company. It’s another Mad Hedge 20 bagger. Buy (NVDA) on dips.

Biden may try an SPR Release to cap gasoline prices. There are 741 barrels in the Strategic Petroleum Reserve, enough for 21 days of US consumption. It’s sitting there costing money, essentially a government subsidiary for the energy industry. Why have it if the US is now a net energy exporter? The concern has been enough to drop oil prices by 10%.

Rents for single-family homes are up 10.2% YOY, and will continue to rise. Miami has the highest rent inflation in the country, and the highest-priced homes are seeing the fastest increases.

Weekly Jobless Claims drop to new post-pandemic low, to 268,000, just fractionally. There are 2 million continuing claims. The great resignation continues.

John Deere strike ends, with some of the best terms for workers in 40 years. It cost the company $2.5 billion. They get an immediate 10% raise and $7,500 bonus, larger out-year raises, and big performance bonuses. There is a lot of making up for 30 years of no real wage growth going on here. It points a loaded gun at the head of the “transitory” argument for inflation. Buy (DE) on dips.

My Ten-Year View

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!

With the disastrous November options expiration, my November month-to-date performance plunged to -7.73%. My 2021 year-to-date performance took a haircut to 80.82%. The Dow Average is up 16.34% so far in 2021.

My entire portfolio expired on Friday, and I am 100% in cash. Of our ten positions, six made money and four lost. In addition, subscribers to the Mad Hedge Technology letter had another five winners, as tech stocks are still on a tear.

That brings my 12-year total return to 503.37%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return has ratcheted up to 42.24%, easily the highest in the industry.

My trailing one-year return popped back to positively eye-popping 96.56%. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Coronavirus cases at 48 million and rising quickly and deaths topping 772,000, which you can find here at https://coronavirus.jhu.edu.

The coming week will be all about the inflation numbers.

On Monday, November 22 at 7:00 AM, Existing Homes Sales for October are released.

On Tuesday, November 23 at 6.45 AM, the Flash Manufacturing PMI is announced.

On Wednesday, November 24 at 5:30 AM, US Q3 GDP second estimate is published. At 7:00 AM we get New Home Sales for October. Minutes from the last Fed meeting are printed at 2:00 PM.

On Thursday, November 25 markets are closed for Thanksgiving Day.

On Friday, November 26 at 2:00 PM, the Baker Hughes Oil Rig Count are disclosed.

As for me, when I was shopping for a Norwegian Fiord cruise for next summer, each stop was familiar to me because a close friend had blown up bridges in every one of them.

During the 1970s at the height of the Cold War, my late wife Kyoko flew a monthly round trip from Moscow to Tokyo as a British Airways stewardess. As she was checking out of her Moscow hotel, someone rushed at her and threw a bundled typed manuscript that hit her in the chest.

Seconds later a half dozen KGB agents dog-piled on top of her. It turned out that a dissident was trying to get Kyoko to smuggle a banned book to the West and she was arrested as a co-conspirator and bundled away to Lubyanka Prison.

I learned of this when the senior KGB agent for Japan contacted me, who had attended my wedding the year before. He said he could get her released, but only if I turned over a top-secret CIA analysis of the Russian oil industry.

At a loss for what to do, I went to the US Embassy to meet with ambassador Mike Mansfield, who as The Economist correspondent in Tokyo I knew well. He said he couldn’t help me as Kyoko was a Japanese national, but he knew someone who could. Then in walked William Colby, head of the CIA.

Colby was a legend in intelligence circles. After leading the French resistance with the OSS, he was parachuted into Norway with orders to disable the railway system. Hiding in the mountains during the day, he led a team of Norwegian freedom fighters who laid waste to the entire rail system from Tromso all the way down to Oslo. He thus bottled up 300,000 German troops, preventing them from retreating home to defend themselves from an allied invasion.

During the Vietnam war, Colby became notorious for running the Phoenix assassination program.

I asked Colby what to do about the Soviet request. He replied, “give it to them.” Taken aback, I asked how. He replied, “I’ll give you a copy.” Mansfield was my witness so I could never be arrested for being a turncoat. Copy in hand, I turned it over to my KGB friend, and Kyoko was released the next day and put on the next flight out of the country. She never took a Moscow flight again.

I learned that the report predicted that the Russian oil industry, its largest source of foreign exchange, was on the verge of collapse. Only massive investment in modern western drilling technology could save it. This prompted Russia to sign deals with American oil service companies worth hundreds of millions of dollars.

Ten years later, I ran into Colby at a Washington event, and I reminded him of the incident. He confided in me “You know that report was completely fake, don’t you?” I was stunned. The goal was to drive the Soviet Union to the bargaining table to dial down the Cold War. I was the unwitting middleman. It worked. That was Bill, always playing the long game.

After Colby retired, he campaigned for nuclear disarmament and gun control. He died in a canoe accident in the lake near his Maryland home in 1996.

Stay Healthy.

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

November 15, 2021

Diary, Newsletter, Summary

Global Market Comments
November 15, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or PROFITING FROM INFLATION),
($INDU), (TLT), (TBT), (MS), (GS), (BAC), (BRKB), (TSLA)

The Market Outlook for the Week Ahead, or Profiting from Inflation

Diary, Newsletter, Research

Worried about inflation?

I’m not. That’s because I know how to trade inflation, which we had in spades during the 1970s when it reached a horrific 18% rate. Those who figured out the game early made fortunes. Those who didn’t got killed.

And what is the best protection against inflation? You own stocks and homes, as much as you can get your hands on.

That’s because in an inflationary environment, companies can raise their prices faster than the inflation rate, which they have been doing since the summer. That’s why we have just seen the best earnings quarter in recent memory and all-time high stock indexes.

Homes do well because there are still 85 million millennials chasing a housing stock that is easily short ten million homes and are given free money to chase prices upward.

I asked a local real estate agent when home prices would slow down and she answered, “it might slow down on Christmas eve and Christmas day, and after that, it will take off again.”

I think home prices will continue to rise for another decade, but not at this year’s ballistic rate.

What about impending rising interest rate, you may ask? They will rise but not enough to hurt either stocks or homes. The pandemic vastly accelerated technology, which we all know is the greatest price destroyer of all time. So, inflation will go up, but from zero to 3%-4%, not the 18% of yore.

And yes, prices are rising for the working classes, those least able to pay them. But the same minimum wage workers are getting the biggest pay hikes in history, up to 100% in some cases, more than offsetting inflation.

And while stocks and homes see rising inflation, bonds don’t. My feeling is that the bond market will stumble across it in the dark some nights and prices will crash. Bonds will keep ignoring inflation until they can’t. The bond vigilantes will then return with a vengeance and are doing their stretching exercises as we speak.

One of the odder things about the past week is that each of the three announcements heralding sharply higher inflation trigger sharp moves up in bonds when they were supposed to go down. That worked until Thursday when the worst 30-year Treasury bond auction since 1990 prompted a $5.00 selloff.

Another bizarre development is that call options are trading at greater premiums than put options, an exceedingly rare event. That means that the consensus for stocks is now almost universally up.

It also means that the at-the-money long-dated LEAPS call option spreads I have been pelting my Concierge members with have become massively profitable. Six months out you can earn eye-popping 100% returns, and 200% in some of the more volatile names, like (ROM) and (MSTR).

The bottom line is that goldilocks is moving in for the long term and might advance to senior citizenship on this watch.

That works for me, so I’m going on a long hike.

The $1.2 Trillion Infrastructure Budget Passes, adding another 6% in GDP growth for the next two years. Construction detours are about to break out all over the country, and the domestic recovery play is on fire. Lost along the way was $550 million in social spending. No increase in corporate taxes sets up a perfect storm for stocks the next several months. Stay fully invested as I begged you to do weeks ago.

The US Reopens, provided you have two Covid shots and a test within the last three days. Got to keep those pesky diseased foreigners out! Hotels, airlines, casinos, and cruise lines took off like a scalded chimp, taking the indexes to new all-time highs. Buy (ALK) and (LUV) on dips.

The Bitcoin Rally Continues, with new all-time highs for both (BITO) and (ETHE). Concerns about the monetary health of the US are rising ahead of a major debt ceiling fight in Congress in December.

Inflation Soars with a Red Hot 6.2% CPI Print in October, the highest in 31 years. Energy, rent, and car costs led the gains. Bitcoin (BITO) and Ethereum (ETHE) jumped to new all-time highs in response. This is only going to get better. You can now count on a Fed interest rate hike in June.

The Disappearing Worker Trend Continues, with a record 4.4 million quitting in September. Workers are taking advantage of the labor shortage to switch jobs for higher wages. This will get worse before it gets better. Good luck trying to hire anyone.

US Consumer Sentiment Hits Ten-Year Low, down from 71.7 to 68.6 in October, according to the University of Michigan. Inflation at a 30-year high 6.2% is starting to hit consumers hard.

Elon Musk Tesla Sales Top $5.1 billion, to pay off Uncle Sam. That must be one hell of a tax bill. At this rate, the market is rapidly running out of the sole seller. Buy (TSLA) on dips.

My Ten-Year View

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!

My Mad Hedge Global Trading Dispatch saw a massive +8.95% gain in October, followed by a decent 4.42% so far in November. My 2021 year-to-date performance moved to a new high of 92.97%. The Dow Average is up 18.00% so far in 2021.

After the recent ballistic move in the market, we got a week of consolidation which brought some generalized bitching, moaning, and wining.

I am continuing to run my longs in. Those include (MS), (GS), (BAC), (BRKB), and a short in the (TLT). The (TLT) short brought some hair-raising moments when we got a $3.00 spike up in the wake of the red hot 6.2% CPI release. I knew it was a complete BS move and successfully stared it down, watching it all reverse the next day. I don’t do this very often.

All positions are now approaching their maximum profit point and we have nothing left but time decay to capture. So, I am going to run these into the November 19 expiration in 4 trading days and capture all the accelerated time decay.

That brings my 12-year total return to 515.52%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return has ratcheted up to 43.26%, easily the highest in the industry.

My trailing one-year return popped back to positively eye-popping 112.08%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Coronavirus cases at 47 million and rising quickly and deaths topping 763,000, which you can find here.

The coming week will be all about the inflation numbers.

On Monday, November 15 at 9:00 AM, the New York Empire State Manufacturing Index for November is released. WeWork reports.

On Tuesday, November 16 at 8:30 AM, US Retail Sales for October are printed. Home Depot (HD) and Walmart (WMT) report.

On Wednesday, November 17 at 8:30 AM, the Housing Starts and Building Permits for October are published. NVIDIA (NVDA) and Cisco Systems (CSCO) report.

On Thursday, November 18 at 8:30 AM, Weekly Jobless Claims are announced. The Philadelphia Fed Manufacturing Index is printed. Macy's (M) and Alibaba (BABA) report.

On Friday, November 19 at 2:00 PM, the Baker Hughes Oil Rig Count are disclosed.

As for me, I am sitting in the Centurion Lounge in San Francisco Airport waiting for a United flight to Las Vegas where I have to speak at an investment conference. I have time to kill so I will reach back into the deep dark year of 1968 in Sweden.

My trip to Europe was supposed to limit me to staying with a family friend, Pat, in Brighton, England for the summer. His family lived in impoverished council housing.

I remember that you had to put a ten pence coin into the hot water heater for a shower, which inevitably ran out when you were fully soaped up. The trick was to insert another ten pence without getting soap in your eyes.

After a week there, we decided the gravel beach and the games arcade on Brighton Pier were pretty boring, so we decided to hitchhike to Paris.

Once there, Pat met a beautiful English girl named Sandy, and they both took off for some obscure Greek island, the ultimate destination if you lived in a cold, foggy country.

That left me stranded in Paris.

So, I hitchhiked to Sweden to meet up with a girl I had run into while she was studying English in Brighton. It was a long trip north of Stockholm, but I eventually made it.

When I finally arrived, I was met at the front door by her boyfriend, a 6’6” Swedish weightlifter. That night found me bedding down in a birch forest in my sleeping bag to ward off the mosquitoes which hovered in clouds.

I started hitchhiking to Berlin, Germany the next day. I was picked up by Ronny Carlson in a beat-up white Volkswagen bug to make the all-night drive to Goteborg where I could catch the ferry to Denmark.

1968 was the year that Sweden switched from driving English style on the left to the right. There were signs every few miles with a big letter “H”, which stood for “hurger”, or right. The problem was that after 11:00 PM, everyone in the country was drunk and forgot what side of the road to drive on.

Two guys on a motorcycle driving at least 80 pulled out to pass a semi-truck on a curve and slammed head on to us, then were thrown under the wheels of the semi. The driver was killed instantly, and his passenger had both legs cut off at the knees.

As for me, our front left wheel was sheared off and we shot off the mountain road, rolled a few times, and was stopped by this enormous pine tree.

The motorcycle riders got the two spots in the only ambulance. A police car took me to a hospital in Goteborg and whenever we hit a bump in the road, bolts of pain shot across my chest and neck.

I woke up in the hospital the next day, with a compound fracture of my neck, a dislocated collar bone, and paralyzed from the waist down. The hospital called my mom after booking the call 16 hours in advance and told me I might never walk again. She later told me it was the worst day of her life.

Tall blonde Swedish nurses gave me sponge baths and delighted in teaching me to say Swedish swear words and then laughing uproariously when I made the attempt.

Sweden had a National Healthcare system then called Scandia, so it was all free.

Decades later, a Marine Corp post-traumatic stress psychiatrist told me that this is where I obtained my obsession with tall, blond women with foreign accents.

I thought everyone had that problem.

I ended up spending a month there. The TV was only in Swedish, and after an extensive search, they turned up only one book in English, Madame Bovary. I read it four times but still don’t get the ending.

The only problem was sleeping because I had to share my room with the guy who lost his legs in the accident. He screamed all night because they wouldn’t give him any morphine.

When I was released, Ronny picked me up and I ended up spending another week at his home, sailing off the Swedish west coast. Then I took off for Berlin to get a job since I was broke.

I ended up recovering completely. But to this day whenever I buy a new Brioni suit in Milan, they have to measure me twice because the numbers come out so odd. My bones never returned to their pre-accident position and my right arm is an inch longer than my left. The compound fracture still shows upon X-rays.

And I still have this obsession with tall, blond women with foreign accents.

Go figure.

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

Brighton 1968

Ronny Carlson in Sweden

The Market Outlook for the Week Ahead, or A Perfect Upside Storm

Diary, Newsletter

Welcome to the perfect storm.

If there was ever any doubt that the market was going straight up for the rest of the year, it was dashed when the infrastructure budget passed on late Friday night with bipartisan support. Another $1.2 trillion will be dumped into the economy next year, adding 6% to GDP growth.

Of course, the stock market started sniffing out this possibility and resumed racing yet again to new all-time highs on September 30.

The latest round of earnings reports proved that corporate profit margins are exploding, along with profits. Demand is through the roof. It turned out that demand WASN’T lost, just deferred, as I vociferously begged followers to buy stocks at the April 2020 bottom.

Interest rates went down instead of up sharply on news of the Fed taper.

And the 10% correction that many expected never showed, forcing managers to chase the market so they can be seen as fully invested in the right names at yearend. That means buying more Alphabet (GOOGL), Microsoft (MSFT), Goldman Sachs (GS), and Morgan Stanley (MS) at whatever price so managers can look like the brilliant people that they really AREN’T.

There is no doubt that the economic data is turning from mixed to red hot.

We will see a Capital spending renaissance in 2022 as the economy shifts from manufacturing to service-driven, and services account for 80% of US GDP. It’s a perfect formula for an economy that is catching on fire.

As for the missing 5 million workers, I think what we are seeing is a 9/11 effect. That’s when people become aware of the transitory nature of life and ask themselves why they are working at a job they hate, some 80% of the labor force, especially at the minimum wage level. They retrain for better-paying, more meaningful professions, retire early, or otherwise go missing in action.

There is another category of missing workers: those who have made so much in the stock market and Bitcoin in the last 18 months they never have to work another day in their life. Are there 5 million of them? Maybe.

And how come everybody in the world knows that interest rates are rising except the bond market? The United States Treasury Bond Fund (TLT) has seen two, count them, two massive three-point RALLIES in the last ten days. The (TLT) may give all this back this week when we get hot inflation data.

It is a positioning issue and a classic “buy the rumor, sell the news” on interest rates. When the entire world is short bonds, they can only go UP. This means we are likely to see a $141-$151 (TLT) range in bonds for the next six months until we start to see actual interest rate RISES.

The Fed Tapers! The Fed taper starts immediately and will accelerate in 2022 until it goes to zero by June. Stocks took off, while bonds dove a $1.50 as soon as they noticed that “transitory” was missing from the release. Will the first interest rate hike in four years be moved up to June? Or do we get a double rate hike in December 2022? That’s where we may see the real volatility, after the market close. Semiconductor growth stocks hit new all-time highs. Financials moving back to highs, as are big tech stocks.

Q3 GDP comes in at a weak 2.0%, down from a 6% rate in Q2, thanks to the ravages of the delta virus, now in the rearview mirror. What happens next? That 4% wasn’t lost, just deferred into 2022. The rip-roaring 6% growth rate returns. That’s why stocks are pushing up to new all-time highs right now. I’m looking for a 5% growth rate next year as government stimulus spending eventually fades.

Nonfarm Payroll Report explodes to the upside in October at 531,000. The Headline Unemployment Rate drops to 4.6%. Pandemic benefits have ended, and a wider vaccination rate encouraged workers it is safe to go back on the job. The back months were revised up 250,000. Manufacturing was up 60,000 and Leisure & Hospitality was up 164,000, The U-6 “discouraged worker” unemployment rate fell to 8.3%. And there is massive pent-up hiring is yet to come. The US could see full employment by the end of Q3 anticipating a 6% GDP growth rate. The markets loved it and the (SPY) is zeroing in my $475 yearend target.

Inflation is rampaging, according to the Department of Commerce, which saw a sizzling 4.4% rate in September. That’s the fastest rate in 30 years. Rising energy and wage costs are big issues. This is why Goldman Sachs has moved up its forecast for the first interest rate rise to July 2022.

US Consumer Spending bounces back, up 0.6% in September after a hot 1% move in August. Demand for services took the lead as shortages head off spending on goods, like cars.

Ethereum hits a new all-time high, ticking at $4,670 in response to the Fed’s immediate taper. Bitcoin is still consolidating its recent three-month doubling. Buy (BITO), (ETHE), and (BLOK) on dips.

US Stock Buy Backs hit record in Q3, topping a staggering $224 billion, and the best is yet to come as companies try to burn through 2021 repurchase budgets. And you wonder why the stock market is going up?

US Dollar hits one-year high on red hot jobs data, presaging higher interest rates. Everyone seems to know that rates are rising except the bond market.

My Ten-Year View

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 240,000 here we come!

My Mad Hedge Global Trading Dispatch saw a massive +8.95% gain in October, followed by a decent 1.74% so far in November. My 2021 year-to-date performance maintained 90.30%. The Dow Average is up 16.7% so far in 2021.

After the recent ballistic move in the market, I am continuing to run my longs in Those include (MS), (GS), (BAC), (BRKB), and a short in the (TLT). All are approaching their maximum profit point and we have nothing left but time decay to capture. So, I am going to run these into the November 19 expiration in 9 trading days. It’s like having a rich uncle write you a check one a day.

That brings my 12-year total return to 512.85%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 43.04 easily the highest in the industry.

My trailing one-year return popped back to positively eye-popping 112.94%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Coronavirus cases at 46.5 million and rising quickly and approaching 755,000 deaths, which you can find here.

The coming week will be all about the inflation numbers.

On Monday, November 8 at 9:00 AM, US Consumer Inflation Expectations for October are out. PayPal reports.

On Tuesday, November 9 at 8:30 AM, the all-important Producer Price Index is published. DR Horton (DHI) reports.

On Wednesday, November 10 at 8:30 AM, the Core Inflation Rate for October is printed. Walt Disney reports (DIS).

On Thursday, November 11 at 8:30 AM, Weekly Jobless Claims are announced.

On Friday, November 12 at 8:30 AM, the University of Michigan Consumer Sentiment is announced.

At 2:00 PM, the Baker Hughes Oil Rig Count is disclosed.

As for me, dentists find my mouth fascinating as it is like a tour of the world. I have gold inlays from Japan, cheap ceramic fillings from Britain’s National Health, and loads of American silver amalgam.

But my front teeth are the most interesting as they were knocked out in a riot in Paris in 1968.

France was on fire that year. Riots on the city’s South Bank near Sorbonne University were a daily occurrence. A dozen blue police buses packed with riot police were permanently parked in front of the Notre Dame Cathedral ready for a rapid response across the river.

President Charles de Gaulle was in hiding at a French airbase in Germany. Many compared chaos to the modern-day equivalent of the French Revolution.

So, of course, I had to go.

This was back when there were five French francs to the US dollar and you could live on a loaf of bread, a chunk of cheese, and a bottle of wine for a dollar a day. I was 16.

The Paris Metro cost one franc. To save money, I camped out every night in the Parc des Buttes Chaumont, which had nice bridges to sleep under. When it rained, I visited the Louvre, taking advantage of my free student access. I got to know every corner. The French are great at castles….and museums.

To wash I would jump in the Seine River every once in a while. But in those days, not many people in France took baths anyway.

I joined a massive protest one night which originally began over the right of men to visit the women’s dorms at night. Then the police attacked. Demonstrators came equipped with crowbars and shovels to dig up heavy cobblestones dating to the 17^th century to throw at the police, who then threw them back.

I got hit squarely in the mouth with an airborne projectile. My front teeth went flying and I never found them. I managed to get temporary crowns which lasted me until I got home. I carry a scar across my mouth to this day.

I visited the Left Bank just before the pandemic hit in 2019. The streets were all paved with asphalt to make the cobblestones underneath inaccessible. I showed my kids the bridges I used to sleep under, but they were unimpressed.

But when I showed them the Mona Lisa at the Louvre, she was as enigmatic as ever.

Everyone should have at least one Paris in 1968 in their lifetime. I’ve had many and am richer for it.

Stay Healthy.

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

1968

2019

November 5, 2021

Diary, Newsletter, Summary

Global Market Comments
November 5, 2021
Fiat Lux

Featured Trade:

(NOVEMBER 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(BRKB), (COIN), (IWM), (GOOGL), (MSFT), (MS), (GS), (JPM),
(BABA), (BIDU), (JD), (ROM), (PYPL), (FXE), (FXA), (FXB), (CRSP), (TSLA), (FXI), (BITO), (ETHE), (TLT), (TBT), (BITO), (CGW)

Tag Archive for: (TBT)