(TLT) Archives - Page 50 of 102 - Mad Hedge Fund Trader

Tag Archive for: (TLT)

Mad Hedge 2021 H1 Trade Analysis

I finally managed to carve out a few hours to analyze my 2021 H1 trades, and what a year it’s been!

From January 1 to June 30, the Mad Hedge Fund Trader sent you 124 trade alerts completing 64 round trips in four asset classes. These generated a profit of 70.59% in six months, more than we made all of last year.

mostbet mostbet giriş mostbet mostbet giriş mostbet mostbet giriş mostbet mostbet giriş mostbet mostbet giriş

It is the most prolific performance since we launched Mad Hedge Fund Trader 14 years ago.

In my January 6 Mad Hedge Annual Asset Class Review (click here for the link--you must be logged in to the site), I predicted that the Dow Average ($INDU) would rise 30% for the end of the year. This proved immensely valuable.

That view enabled me to go maximum aggressive, full speed ahead, damn the torpedoes. It’s not that I was so certain that the stock market would go ballistic to the upside. But with the Federal Reserve pumping trillions of dollars of quantitative easing into the economy, record deficit spending, and the pandemic coming under control, I was certain that markets would not go down.

So, I looked into my bag of tricks and pulled out a strategy ideal for this scenario, the in-the-money vertical bull call debit spread (click here for the video on how to execute one of these). Such an approach allowed me to make a maximum profit even if the underlying security went up, sideways, or down small. It worked like a charm.

Here are by trades assorted by asset class:

Equities – 44.14%
Bonds – 24.12%
Commodities – 1.52%
Precious Metals – 0.81%

2021 was definitely the year of equities. In fact, the risk/reward for equities was so compelling that it was almost a waste of time to look at anything else. Equity trades accounted for 62.53% of my total profits.

I split my equity selections with my well-known “barbell strategy” with equal allocations split between big technology and domestic recovery stocks. That way, I always had positions that were going up.

Short positions in the bond market (I had only one long trade) accounted for another 34.17% of my performance. This was basically a first-quarter trade where I caught the collapsing bond market by both lapels and shook it for all it was worth, catching a dive from $162 to $132 in the United States Treasury Bond Fund (TLT). I mostly quit bond trading in March, not wanting to visit the trough too many times in an extremely oversold condition. That was a great call.

Commodities delivered another 2.15% of return with a single trade in the SPDR S&P Metals & Mining ETF (XME). I thought exploding economic growth would cause commodity prices to soar, and they did. But there were better plays to be had buying key stocks in the sector directly, such as Freeport McMoRan (FCX).

As an afterthought, I made another 1.15% in precious metals with two trades long gold. I thought gold would go up this year but so far, no luck. The gold (GLD) faded away when US Treasury bonds became the asset class of choice from March onward.

Of 64 round trips, I lost money on only four, giving me a success rate of 93.75%, far and away the best in the industry. One was a short in Tesla (TSLA) in the $800s. It later fell to $550. The next was a long in Tesla. I got stopped out when it fell below $600. That’s OK because I made a 10X return trading Tesla in 2020.

Welcome to show business.

The next hickey came from a long in Microsoft (MSFT) which I got stopped out of. It went straight up afterwards. Then I took a small hit in Delta Airlines (DAL) for the same reason. The higher the market goes, the faster I stop out as part of my risk control discipline.

All in all, it’s been one hell of a year. I cut back my trading dramatically in June and July partly because the market was so incredibly high, but also to give my loyal staff a rest. Imagine working double overtime for a year and a half! How about sending out 13 trade alerts out in one day!

We are now all refreshed and well-rested ready to take on all comers in H2. The harder I work, the luckier I get. It really is true.

As I tell my beginning traders, work in, money out.

To download the entire 2021 H1 trade history, please click here.

Good Luck and Good Trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

Capturing Peak Profits

August 2, 2021

Diary, Newsletter, Summary

Global Market Comments
August 2, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or TAKING A BREAK)
(AAPL), (AMZN), (FB), (MSFT), (TSLA), (JPM), (TLT), (SPY)

The Market Outlook for the Week Ahead, or Taking a Break

Diary, Newsletter, Research

When things can’t be better, they really can’t get any better, and there is no upside left.

As I expected, big tech companies announced earnings for the ages, the top four totaling a staggering $56.6 billion in profits in Q2, or $226.4 billion annualized. That compares to total US Q1 profits of $2.347 trillion. Then their stocks fell apart, with Amazon leading the charge to the downside.

To say tech earnings were impressive would be a vast understatement, with Apple (AAPL) coming in at $21.7 billion, Amazon (AMZN) at $7.8 billion, Facebook (FB) at $10.4 billion, and Microsoft (MSFT) at $16.7 billion.

However, since we are in the “What have you done for me lately” business, what do we have to look forward in August?

Covid cases are soaring nationally tripling off the 15,000 a day lows of a month ago. The delta variant is twice as contagious and twice as fatal as earlier ones. Mask mandates are back in the big cities, pushing back economic growth and a jobs recovery out into 2022. The least vaccinated stated are seeing hospital systems overwhelmed once again. School reopenings are now an unknown, and if they do, it will be with masks.

I sent my kids to a Boy Scout camp this week. On the second day, two unvaccinated staff members tested positive for delta and the county immediately shut the place down, sending home 500 disappointed scouts and parents. Dreams of long sought merit badges went up in smoke. The same thing is happening across the entire economy.

The next three months are historically the worst performing of the year, generating an average 0.03% over the last 100 years. Inflation reports are going to remain high for the rest of the year. The Fed has a new reason to keep interest rates a zero for longer, bad for banks, brokers, commodities, and industrials.

Oh, and the next round of spectacular tech earnings are three months away.

There is another factor in play. Investors have made the most money in their lives over the last 16 months, including me. The temptation to take the money and run is strong and irresistible. Traders have visions of Ferraris dancing in their eyes. This alone would bring on an overdue 5%-10% pull back.

So what is the smart thing to do here? Sell all your short-term positions but keep all your long-term positions and LEAPS. The market isn’t going down enough to justify the round-trip expenses and capital gains taxes.

If you have new cash flows keep it in money market funds. People will be shocked by the speed and viciousness of the coming selloff. But when it occurs, the best buying opportunity in a year will be on its knees begging for your attention.

It may feel cataclysmic, another Armageddon, and like the end of the world, but it won’t be. After all, we have seen no less than 36 10% corrections in my lifetime. The investors who hung in made the most money every single time.

I’ll tell you when we hit bottom with a raft of new LEAPS recommendations, provided I can get them out fast enough.

The Fed stands pat, keeping overnight rates at 0%-0.25%. The delta variant has pushed the taper off three months, but Jay Powell gave the barest of hints that it is the next step to take. We have 9 million unemployed and 9 million job openings but there is a massive skills gap, with jobless waitresses and retails in over supply and coders and artificial intelligence specialist sought after. It’s all the result of 40 years of under investment in our education system.

US Q2 GDP comes in at 6.5%, one of the strongest in economic history, but less than forecasts that were as high as 10%. Supply chain restraints we the main explanation for the shortfall. All that does is push growth into 2022, when people CAN get parts and labor. In the meantime, personal consumption soared by 11.8%, the hottest report since 1952, proving the demand is there.

Covid Cases triple from recent lows to 43,700 a day. Blame the delta variant, which originated in India, and now accounts for 86% of new cases. Twice as contiguous, with a greater fatality rate and more long-term effect, delta is prompting the return of mask mandates in several cities. Only the unvaccinated are affected. This could be the trigger for the next correction.

Smart phones will deliver the next big chip shortage, even if the chip shortage for cars abates. The bad news? There are 22 times more phones produced each year than cars, 1.4 billion versus only 64 million in 2020. Out of the frying pan and into the fire.

S&P Case Shiller smashes all records, up 17% YOY for national home prices. Phoenix (25.9%), San Diego (24.7%), and Seattle (23.4%) lead. These numbers are past “extraordinary.” Expect it to continue.

New Homes Sales plunge to 676,000, down 6.6% on a signed contract basis, but prices are up 6%. Inventories are up from 5 months to a still low 6.5 months. Shortages of land, labor, and materials are still the big issue.

Pending Home Sales drop 1.9% in June on a signed contract bases. High prices are curing high prices, with the Case-Shiller National Home Price Index up 17% YOY. The south and west posted the biggest declines. Single family homes have dropped for three months in a row to a one year low.

China meltdown continues, with the Beijing government apparently withdrawing from western capital markets. It’s all about showing the world who is in charge and punishing the billionaires by destroying their stocks. They are wiping out $1 trillion in equity per day and don’t care if you get hit as well. Cathy Wood’s Ark Innovation ETF (ARKK) is dumping everything they have. Avoid China at all cost.

Tesla announces first $1 billion profit in Q2, despite losing $23 million in Bitcoin. That is 10X the year ago report. They could have made a lot more if they had more chip supplies. The energy business brought in a rapidly growing $800 million in revenues. The Austin and Berlin Gigafactory’s are coming online at the end of the year, allowing them to scale globally. The Cybertruck is on hold and production of Powerwall’s cut back until they can get more chip supplies, creating extreme shortages. Buy (TSLA) on dips. There’s a 10X from here.

Tesla claims No.2 auto sales spot in Europe in June, just behind Volkswagen’s Golf, and beathing Daimler Benz, Audi, Fiat, and Renault. The company shipped 25,697 Model 3’s, which is perfect for the continent’s tight spaces, short distances, and green preferences. Big government subsidies to switch from internal combustion engines helped too.

Tesla Profits

Bitcoin tops $40,000 in a massive short covering rally. Tesla may start taking the crypto currency as payment for new vehicles and Amazon (AMZN) may get into the game as well. While China is studying way to make a digital yuan (CYB) and Europe a digital Euro (FXE), the US congress sees such a move as pointless.

Robinhood IPO (HOOD) Bombs, trading down as much as 12% from its $38.00 IPO price. That leaves it with a still impressive $29 billion market capitalization, a fifth the size of Morgan Stanley. What happens when individuals get their allocations? No “diamond hands” here. It looks like a “BUY” after it drops by half opportunity, just like Tesla after its IPO. The facilitator of meme stock frenzies has best ever year is behind it, or until we get another pandemic. The company has already paid $127 million in fines and almost went under in January. Avoid (HOOD) for now.

My Ten Year View

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

My Mad Hedge Global Trading Dispatch saw a modest +0.61% in July. My 2021 year-to-date performance appreciated to 69.21%. The Dow Average was up 14.16% so far in 2021.

I stuck with my four positions, a long in (JPM) and a short in the (TLT) and a double short in the (SPY). I bled all the way until Friday, when big hits to tech stocks took the (SPY) down and edging me up to a positive return for July. That leaves me 60% in cash. I’m keeping positions small as long as we are at extreme overbought conditions.

That brings my 11-year total return to 491.76%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 12.15%, easily the highest in the industry.

My trailing one-year return retreated to positively eye-popping 107.72%. 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 Corona virus cases at 34.9 million and rising quickly and deaths topping 613,000, which you can find here.

The coming week will bring our monthly blockbuster jobs reports on the data front.

On Monday, August 2 at 7:00 AM, the Manufacturing PMI for July is published. NXP Semiconductor (NXP) reports.

On Tuesday, August 3, at 7:30 AM, Factory Orders for June are released. Amgen (AMGN), Eli Lily (LLY), and Alibaba (BABA) report.

On Wednesday, August 4 at 5:30 AM, the ADP Private Employment Report is published. Uber (UBER) and General Motors (GM) report.

On Thursday, August 5 at 8:30 AM, Weekly Jobless Claims are announced. Square (SQ) reports.

On Friday, August 6 at 8:30 AM, we get the Nonfarm Payroll Report for July. Berkshire Hathaway (BRKB) reports.

As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie.

My family summer vacation that year was on the slopes of Mount Rainier in Washington state. Since it was raining every day, the other kids wanted to go home early. So my parents left me and my younger brother in the hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for his story). The deal was for us to hitch hike back to Los Angeles when we got off the mountain.

In those days, it wasn’t such an unreasonable plan. The Vietnam war was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself.

When we got off the mountain, I looked at the map and saw there was this fascinating country called “Canada” just to the north. So, it was off to Vancouver. Once there, I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east.

We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, inseminating cows, and eating steak three times a day. I made friends with the cowboys by reading them their mail, which they were unable to do. There were lots of bills due, child support owed, and alimony demands.

In Saskatchewan, the roads ran out of cars, so we hopped a freight train in Manitoba, narrowly missing getting mugged in the rail yard. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards ad, the wind blowing through your hair!

When the engineer spotted us on a curve, he stopped the train and invited us to up the engine. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth.

Our last ride into Montreal offered to let us stay in his boat house as long as we wanted so there we stayed. Thank you, WWII RAF bomber pilot Group Captain John Chenier!

Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion. The pay was $1 an hour and all we could eat. At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answer 20, and my brother answered 21. “Well, there’s my inventory problem” she replied.

And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her?

I had to allow two weeks to hitch hike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t.

We developed a system where my parents could keep track of us. Long distance calls were then enormously expensive. So, I called home collect and when my dad answered he asked what city the call was coming from. When the operator gave him the answer, he said he would not accept the call. I remember lots of surprised operators. But the calls were free, and dad always knew where we were.

We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far has Seattle with only three days left until school started.

Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment.

I haven’t stopped traveling since, my tally now topping all 50 states and 135 countries.

And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night, our last ride of the day took us home and provided us with an extra bedroom or a garage to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride.

It was the adventure of a lifetime and am a better man for it.

Stay healthy.

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

Summit of Mt. Rainier 1967

McKinnon Ranch Bassano Alberta 1967

American Pavilion Expo 67

Hamburger Stand at Expo 67

Picking Cherries in Michigan 1967

July 30, 2021

Diary, Newsletter, Summary

Global Market Comments
July 30, 2021
Fiat Lux

Featured Trade:

(JULY 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (CRSP), (TLT), (TBT), (BABA), (BIDU), (FXI), (RAD), (TSLA), (NASD), (NKLA), (NIO), (INTC), (MU), (NVDA), (AMD), (TSM), (VXX), (XVZ), (SVXY), (FCX), (ROM), (SPG)

July 28 Biweekly Strategy Webinar Q&A

Diary, Newsletter, Research

July 28 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the July 28 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV.

Q: What is your plan with the (SPY) $443-$448 and the $445/450 vertical bear put spreads?

A: I’m going to keep those until we hit the lower strike price on either one and then I’ll just stop out. If the market doesn’t go down in August, then we are going straight up for the rest of the year as the earnings power of big tech is now so overwhelming. Sorry, that’s my discipline and I’m sticking to it. Usually, what happens 90% of the time when we go through the strike, and then go back down again by expiration for a max profit. But the only way to guarantee that you'll keep your losses small is by stopping out of these things quickly. That’s easy to do when you know that 95% of the time the next trade alert you’ll get is a winner.

Q: Are you still expecting a 5% correction?

A: I am. I think once we get all these great earnings reports out of the way this week, we’re going to be in for a beating. I just don't see stocks going straight up all the way through August, so that’s another reason why I'm hanging on to my short positions in the S&P 500 (SPY).

Q: What’s the best way to play CRISPR Therapeutics (CRSP) right now?

A: That is with the $125-$130 vertical bull call spread LEAPS with any maturity in 2022. We had a run in (CRSP) from $100 up to $170 and I didn’t take the damn profit! And now we’ve gone all the way back down to $118 again. Welcome to the biotech space. You always take the ballistic moves. Someday I should read my own research and find out why I should be doing this. For those who missed (CRSP) the last time, we are one proprietary drug announcement, one joint venture announcement, or one more miracle cure away from another run to $170. So that will probably happen in the next year, you get the $125-$130 call spread, and you will double your money easily on that.

Q: I’m down 40% on the United States Treasury Bond Fund (TLT) January $130-$135 vertical bear put spread LEAPS. What would you do?

A: Number one, if you have any more cash I would double up. Number two, I would wait, because I would think that starting from the Fall, the Fed will start to taper; even if they do it just a little bit, that means we have a new trend, the end of the free lunch is upon us, and the (TLT) will drop from $150 down to $132 where it was in March so fast it will make your head spin. I'm hanging onto my own short position in (TLT). If you are new to the (TLT) space and you want some free money, put on the January 2020 $150-$155 vertical bear put spread now will generate about a 75% return by the January 21, 2022 options expiration. I just didn't figure on a 6.5% GDP growth rate generating a 1.1% bond yield, but that’s what we have. I'm sorry, it’s just not in the playbook. Historically, bonds yield exactly what the nominal GDP growth rate is; that means bonds should be yielding 6.50% now, instead of 1.1%. They will yield 6.5% in the future, but not right now. And that's the great thing about LEAPS—you have a whole year or 6 months for your thesis to play out and become right, so hang on to those bond shorts.

Q: Do you have any ideas about the target for Facebook (FB) by the end of the year?

A: I would say up about 20% from current levels. Not only from Facebook but all the other big tech FANGS too. Analysts are wildly underestimating the growth of these companies in the new post-pandemic world.

Q: Do you think the worst of the pandemic will be over by September?

A: Yes, we will be back on a downtrend by September at the latest and that will trigger the next leg up in the bull market. Delta with its great infectious and fatality rates is panicking people into getting shots. The US government is about to require vaccinations for all federal employees and that will get another 5 million vaccinated. Americans have the freedom to do whatever they want but they don’t have the freedom to kill their neighbors with fatal infections.

Q: What should I do with my China (BABA), (BIDU), (FXI) position? Should I be doubling down?

A: Not yet, and there’s no point in selling your positions now because you’ve already taken a big hit, and all the big names are down 50% from the February high. I wouldn't double down yet because you don’t know what's happening in China, nobody does, not even the Chinese. This is their way of addressing the concentration of the wealth in the top 1% as has happened here in the US as well. They’re targeting all the billionaire stocks and crushing them by restricting overseas flotations and so on, so it ends when it ends, and when that happens all the China stocks will double; but I have absolutely no idea when that's going to happen. That being said, I have been getting phone calls from hedge funds who aren’t in China asking if it's time to get in, so that's always an interesting precursor.

Q: What happened to the flu?

A: It got wiped out by all the Covid measures we took; all the mask-wearing, social distancing, all that stuff also eliminates transmission of flu viruses. Viruses are viruses, they’re all transmitted the same way, and we saw this in the Rite Aid (RAD) earnings and the 55% drop in its stock, which were down enormously because their sales of flu medicines went to zero, and that was a big part of their business. I didn’t get the flu last year either because I didn’t get Covid; I was extremely vigilant on defensive measures in the pandemic, all of which worked.

Q: Why would the Fed taper or do much of anything when Powell wants to be reappointed in February 2022?

A: I don’t think he is going to get reappointed when his four-year term is up in early 2022. His policies have been excellent, but never underestimate the desire of a president to have his own man in the office. I think Powell will go his way after doing an outstanding job, and they will appoint another hyper dove to the position when his job is up.

Q: What are your thoughts on the Chinese electric auto company Nio competing here in the U.S.?

A: They will never compete here in the U.S. China has actually been making electric cars longer than Tesla (TSLA) has but has never been able to get the quality up to U.S. standards. Look what happened to Nikola (NKLA) who’s founder was just indicted. Avoid (NIO) and all the other alternative startup electric car companies—they will never catch up with Tesla, and you will lose all your money. Can I be any clearer than that?

Q: You recently raised the ten-year price target up for the Dow Average from 120,000 to 240,000. What is Nasdaq's target 10 years out?

A: I would say they’re even higher. I think Nasdaq (NASD) could go up 10X in 10 years, from 14,000 to 140,000 because they are accounting for 50% of all earnings in the U.S. now, and that will increase going forward, so the stocks have to go ballistic.

Q: What do you think of Intel (INTC)?

A: I don’t like it. They had a huge rally when they fired their old CEO and brought in a new one. There was a lot of talk on reforming and restructuring the company and the stock rallied. Since then, the market has started insisting on performance which hasn’t happened yet so the stock gave up its gains. When it does happen, you’ll get a rally in the stock, not until then, and that could be years off. So I'd much rather own the companies that have wiped out Intel: (MU), (NVDA), (AMD), and (TSM).

Q: When you do recommend buying the Volatility Index (VIX), do you recommend buying the (VIX) or the (VXX)?

A: You can only buy the VIX in the futures market or through ETFs and ETNs, like the (VXX), the (XVZ), and the (SVXY), or options on these. I would be very careful in buying that because time decay is an absolute killer in that security, and that's why all the professionals only play it from the short side. That's also why these spikes in prices literally last only hours because you have professionals hammering (VIX). Somebody told me once that 50% of all the professional traders in the CME make their living shorting the (VIX) and the (VXX). So, if you think you’re better than the professionals, go for it. My guess is that you’re not and there are much better ways to make money like buying 6-to-12-month LEAPS on big tech stocks.

Q: Can the Delta variant get a bigger pullback?

A: Yes. I expect one in August, about 5%. But if Delta gets worse, the selloff gets worse. You saw what it did last year, down 40% in the (SPY) in only two months, so yes, it all depends on the Delta virus. I'm not really worrying about Delta, it's the next one, Epsilon or Lambda, which could be the real killer. That's when the fatality rate goes from 2% to 50%, and if you think I'm crazy, that's exactly what happened in 1919. Go read The Great Influenza book by John Barry that came out 20 years ago, which instantly became a best seller last year for some reason.

Q: Does the Matterhorn have enough flat space on the top to stand on it?

A: Actually, there is a 6’x6’ sort of level rock to stand on top of the Matterhorn. If you slip, it’s a 5000’ fall straight down on any side, and on a good weather day in the summer, there are 200 people climbing the Matterhorn. There's sometimes a one-hour line just to take your turn to get to the top to take your pictures, and then get down again to make space for the next person. So that's what it's like climbing the Matterhorn, it's kind of like climbing Mount Everest, but I still like to do it every year just to make sure I can do it, and one year I hope to win the prize for the oldest climber of the year to climb the Matterhorn. Every year this German guy beats me; he’s two years older than me.

Q: When will Freeport McMoRan (FCX) start going up? I have the 2023 LEAPS

A: Good thing you have the two-year LEAPS because that gives you two years for inflation to show its ugly face once again. You just have to be patient with these. I think we’ll get a rally in the Fall along with all the other interest rate plays like banks, industrials, money management companies, and so on. (FCX) will certainly participate in that. In the meantime, if we get all the way down to $30 in Freeport McMoRan, I would double up your position.

Q: Why is oil (USO) not a buy? Oil is the ultimate inflation hedge.

A: Yes, unless all of the cars in the United States become electric in the next 15 years, which they will, wiping out half of all demand from the largest oil consumer. The United States consumes about 20 million barrels of oil a day, half of that is for cars, and if you take that out of the demand picture you dump 10 million barrels a day on the market and oil goes back to negative numbers like we saw last year. Never do counter-trend trades unless you’re a professional in from of a screen 24 hours a day.

Q: Should I take profits on my ProShares Ultra Technology ETF (ROM) November $90-$95 vertical bull spread and then enter a new spread when tech sells off?

A: Absolutely! When you have that much leverage and you get these price spikes, you sell! The leverage on this position is 2X on the ETF and 10X on the options for a total of 20X! Well done, nice trade and nice profit, go out and buy yourself a new Tesla and wait for the next dip in tech, which may have already started, and which could power on for the rest of August.

Q: What’s the next move for REITs?

A: REITs came off of historic lows last year; a lot of people thought they were going to go bankrupt, and for companies like (SPG) it was a close-run thing. I would be inclined to take profits on REITs here. The next thing to happen is for interest rates to go up and REITs don’t do that great in a rising rate environment.

Q: When is the off-season in Incline Village?

A: It’s the Spring and the Fall, in between ski season and the summer season. That means there are four months a year here, May/June and September/October, where I’m the only one here and the parking lots are empty. There is no one on the trails, the weather is perfect, the leaves are changing colors, and the roads aren’t crowded, so that is the time to be here. It’s a mob scene in the winter and a worse mob scene in the summer!

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

July 26, 2021

Diary, Newsletter, Summary

Global Market Comments
July 26, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or GETTING INTO STUDIO 54),
(AAPL), (AMZN), (TSLA), (GOOGL), (FB), (NVDA), (TLT)

The Market Outlook for the Week Ahead, or Getting Into Studio 54

Diary, Newsletter

During the heyday of my Morgan Stanley career in the 1980s, back when I had an unlimited expense account, a favorite place to take clients was Studio 54.

The place was full of rock stars, the music was piercing, and strange things were happening in dark corners. It was all the perfect adventure for the impressible visitor from the sedentary Midwest.

Studio 54 was notoriously difficult to get into. There were these hefty doormen dressed in black with big gold chains who did the vetting. If you were famous or a free-spending investment banker, the red ropes were cast aside, and you glided right in. $100 tips spoke volumes too. The hoi polloi could only watch with envy, even after spending hours in line.

The stock market has become a lot like Studio 54. It’s not letting you in. I had ten trade alerts lined up to get into the market on Friday and Monday. I only got off four. After a scant 3.2% decline, stocks turned around so fast it made your head spin. There are strange things happening in dark corners too.

Next week is the first time in a decade when the top five tech companies report earnings. If history is any guide, they will sell off sharply on the reports, form a base in August, then begin their yearend ramp up. This is why I have been hanging on to my short positions.

I continue to belie that the major miss by the markets is how much they are underestimating tech earnings. Maybe they have fully discounted 2021 earnings, but what about 2022-2030?

Let me give you the example of Apple alone. 5G wireless technology is rolling out now which is improving performance by ten times. What about 6G, 7G, and 8G? The cumulative performance gains of a decade of technological improvement is 10,000 times at zero cost!

Do you think Apple will buy more of its own stock in anticipation of this? Do you think everyone else will too?

You bet!

The “Delta” Correction lasted a day, with deaths in some states up 100% in a week. It is a pandemic of the unvaccinated and of children. The stock market was already ripe for a 5% correction. That’s what happens when you double in 16 months. The bond market at a 1.10% yield thinks the recovery is over and we’re going below 1.00% for the ten year.

Facebook is killing people, says Biden, through enabling the spread of vaccine information. Right-wing website says the vaccine causes sterility, alters your DNA, and enables the government to track your location. (FB) says members have the right to lie to each other. This isn’t going away. (FB) shares hit a new all-time high, taking its market cap into the trillion-dollar club.

That was the shortest recession in history in 2020, lasting only two months. Straight down and then straight up, making it the shortest recession in history. But what two months it was, with an eye-popping 22 million jobs disappearing in March and April. We have since made more than half back.

The month-end selloff is back in play, with the 800-point bounce behind us. That’s when big tech reports. With trillions of dollars struggling to get into the market on any dip, a two-day, 3.2% correction is all we are going to get. I managed to strap on stock longs and bond shorts yesterday, but even I got left on the sidelines with my other trade alerts.

Bitcoin breaks $30,000, then bounces back up. It seems to be an inflation/rising interest rate play which does poorly when ten-year yields hit 1.12%. It’s almost trading 1:1 with Freeport McMoRan (FCX). That has to mean we’re soon entering “BUY” territory.

Rents are soaring, up 6.6% in May YOY, according to data collection firm Corelogic. It’s the biggest gain since 2005. Single-family homes, about half of the rental market, are leading the charge. Phoenix is delivering the biggest increases, up 14% YOY, followed by Dallas and Atlanta. What a great time to own!

Share buybacks are turbocharging this market, which could reach an eye-popping record $1 trillion in 2021 and another $550 billion in dividends. Q2 has already seen $350 billion in buybacks. Apple (AAPL) is leading the charge with a monster $250 billion in cash. Alphabet (GOOGL), Microsoft (MSFT), and Berkshire Hathaway (BRKB) follow. Even companies that have never bought the stock before may enter the fray, like Netflix (NFLX), which is a cash flow cow. My yearend target of an S&P 500 at 4,750, up 9.2% from here, is now looking totally attainable.

Existing Home Sales are up 1.4% in June to 5.86 million units, less than expected. Inventories are down 18.8% YOY to 1.25 million units to a 2.6-month supply. The Northeast was the leader, up 2.8%. Median home prices are still soaring to $363,000 and up an eye-popping 23.4% YOY. Sales of homes priced over $1 million are up 147%. No typo here. Some 14% of homes are now sold to investors, while 23% were to all-cash buyers.

GM recalls 69,000 bolts over recharging fire risk. The Ev's use will be severely restricted until fixed, citing “rare manufacturing defects.” Bolts use imported Korean batteries from LG. It’s what happens when you move into a new technology a decade late and rush to catch up. GM will never catch (TSLA). Avoid (GM) and buy (TSLA).

My Ten Year View

My Mad Hedge Global Trading Dispatch profit suffered a -1.65% loss so far in July. My 2021 year-to-date performance appreciated to 66.95%. The Dow Average is up 14.57% so far in 2021.

Two of my positions, a long in (JPM) and a short in the (TLT) did great. But I really took it on the nose with my short positions in the (SPY) when the market melted up on Friday. That should turn out OK when all five big tech companies report this week, which historically marks a market top. That leaves me 60% in cash. I’m keeping positions small as long as we are at extreme overbought conditions.

That brings my 11-year total return to 489.50%, some 2.00 times the S&P 500 (SPX) over the same period. My 12-year average annualized return now stands at an unbelievable 42.25%, easily the highest in the industry.

My trailing one-year return exploded to positively eye-popping 104.96%. 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 34.4 million and rising quickly and deaths topping 611,000, which you can find here. Some 34.1 million Americans have contracted Covid-19.

The coming week will be a weak one on the data front.

On Monday, July 26 at 11:00 AM, New Homes Sales for June are released. Alphabet (GOOGL), Tesla (TSLA), and Amazon (AMZN) report.

On Tuesday, July 27 at 10:00 AM, the S&P Case Shiller National Home Price Index for May is published. Apple (AAPL) reports.

On Wednesday, July 28 at 9:30 AM, the Wholesale Price Index for June is disclosed. Facebook (FB) and Microsoft (MSFT) report.

On Thursday, July 29 at 8:30 AM, we get Weekly Jobless Claims. We also learn the first look at Q2 US GDP, which should be a blockbuster.

On Friday, July 30 at 8:30 PM, we get Personal Income & Spending for June.

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 hote, 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 Vietnam, 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 in from of his Maryland home in 1996.

Nobody believed it for a second.

Stay healthy.

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

July 16, 2021

Diary, Newsletter, Summary

Global Market Comments
July 16, 2021
Fiat Lux

Featured Trade:

(JULY 14 BIWEEKLY STRATEGY WEBINAR Q&A),
(JPM), (MS), (GS), (TLT), (TBT), (CRSP), (AAPL), (TSLA), (QS), (SPCE), (AMZN),
(FCX), (FEYE), (PANW), (HACK)

July 14 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the July 14 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Lake Tahoe, NV.

Q: Which banks are best?

A: JP Morgan (JPM), Morgan Stanley (MS), and Goldman Sachs (GS). That's the trifecta. If you look at the charts, the brokers Morgan Stanley and Goldman Sachs are overwhelmingly outperforming everyone else. They will continue to do that, as the bull market in stocks is a money machine for them.

Q: What has caused interest rates to continue to drop so much in the last 1-2 months? Why are you confident you will see them rise from here on?

A: The reason they've dropped so much is there is a bond shortage (TLT). There is more demand for bonds and reach for yield around the world than the US government is able to supply. Therefore, the US government should do more borrowing and issue more bonds. That's what the market is telling them to do. When your 10-year yield goes to 1.2%, the message is that you're not borrowing enough, not that you're borrowing too much. How does this end? Eventually, the sheer volume of bond issuance will reach global demand. And we will also see some inflation, not much but some, and that will be enough to take us back up to the 1.75% yield that we had in March. I think we will see that by the end of the year, especially if the Fed tapers and cuts back at least the mortgage bond purchases, which is $40 billion/month. Why subsidize housing when there are nationwide bidding wars?

Q: Are you positive on CRISPR Technologies (CRSP)?

A: Yes, but it is a long-term play and I recommend the LEAPS on those that go out to 2023. That said, we did just have a big rally up to the 140s from the 100s so that 40% was pretty good. But that's the way these small biotech’s trade you get long periods of no movement and then sudden explosive moves to the upside when they make a breakthrough.

Q: Are we going to see inflation?

A: We will have some inflation; but the major component of inflation now is used cars and rental cars, which are up 100% year on year, and that is totally unsustainable. That means a year from now, increase in used car prices will be zero, and will actually be a big drag on inflation. So that's what the Fed means when they say that any inflation will be temporary as we go through these tremendous YOY comparisons when demand goes from zero to near infinite. And that's happening in many sectors of the economy right now. You never get rich betting against a 40-year trend, and for inflation that is down.

Q: Has the market peaked for the short term?

A: My bet on a short-term peak is the last week of July when all the big tech companies report. And then we classically get reasonable selloffs after that—buy the rumor, sell the news. That's our next entry point for long positions in this market. Since the presidential election, the index has been unable to drop more than 4.8% as there is so much money on the sidelines trying to get in.

Q: Should I be max long ProShares Ultra Short Treasury Bond Fund (TBT) LEAPS?

A: Just make sure they’re long-dated LEAPS—at least six months to a year or longer. That way you have plenty of time for them to work. The current return on the (TBT) June 2022 $17-$19 vertical bull call LEAPS at $0.75 is 166%.

Q: What’s the chance of Biden’s budget passing?

A: 100%. It’s just a question of how much will be in there—we’re at $597 billion on infrastructure and $3.5 trillion for the rest of spending. That gives you a $4.1 trillion budget for the next fiscal year starting October 30, which is the biggest in history and biggest since WWII on an inflation-adjusted basis. That will go through and keep the stock market percolating for several more years. Dow $240,000 here we come!

Q: Would you sell calls against Apple (AAPL) today?

A: I would, I would do something like the August $165’s. Even then, it’s a high-risk trade because Apple has been on such a parabolic move for the last 2 months. So do that at your own risk; notice I’m not putting out trade alerts telling you to short Apple in any way shape or form. My target for the yearend is $200.

Q: Will Tesla (TSLA) use QuantumScape (QS) batteries to make their own solid-state ones?

A: Tesla will make their own solid-state batteries They are far ahead of QuantumScape with their own technology and eventually, they will wipe them out. So, I am not recommending QuantumScape—they are 10 years behind Tesla. Sorry, I didn’t make that clearer in my research piece.

Q: When do you expect the 7% drop in the market?

A: August/September is usually when the market bottoms. Let’s see if we get it this time. Predicting down moves has been somewhat of a fool's errand in a market when you have infinite QE, infinite fiscal stimulus, infinite monetary stimulus, and the highest economic growth in history. And again, I am upgrading my 10-year forecast for the market; I’m not looking for a Dow 120,000 by 2030 anymore, I’m looking for a Dow 240,000, and when you’re still at only a measly 34,933, you don’t get many 7% drops. In fact, we’ve had none since the election.

Q: Could Tesla make an all-time high by the end of the year?

A: Yes, especially if they make progress on the solid-state batteries. Tesla (TSLA) tends to have sideways periods that can last years and then explosive moves to the upside. It almost trades like a biotech stock.

Q: Is Virgin Galactic (SPCE) a buy here off the back of their successful rocket launch last week?

A: No, any business dependent on retail sales of tickets at $250,000 each has absolutely no chance of ever making a profit in its life. As much as I like Richard Branson, who I used to fly with, the fact is that this business will never make money. It's more of a public relations vehicle for all of the hundreds of Virgin Brands. They’ll never get the cost low enough to make this economic for the average person. Spaceships aren’t cheap, and they don’t sell them at Costco. In fact, you notice that after the rocket launch, the stock dropped 20%. However, if they do drop the price to $100,000 even I might buy a ticket but only if they let me fly the thing.

Q: What is your favorite FANG stock other than Apple?

A: It is Amazon (AMZN). I think it hits $5,000 by the end of the year. If they try to break it up it’ll be worth $10,000, which it will get to eventually (in like 5 years) anyway. They just have absolutely everything working there.

Q: Why is Alaska the worst state to do business in?

A: Well, first of all, it’s only habitable for like 6 months of the year, and otherwise it’s too cold and heating bills are enormous. Also, nothing is produced in Alaska besides tourism and oil, which is subject to enormous volatility. They actually canceled the oil payouts for Alaskan citizens last year. Anything else you want to do in Alaska requires transportation costs from the US. So essentially there are 49 other better states to bring business ideas to.

Q: Will Amazon ever split their stock?

A: No, there's no reason or net benefit to it. Jeff Bezos has never been prone to financial engineering because he never needed to. Natural earnings growth was always so enormous he didn’t need to bother with any of these side games to jack the stock price. So, I would say “no” on a stock split.

Q: In a two-year LEAPS, you’re taking a long position, yes?

A: When you do a LEAPS spread, you're buying a 1-2 year call and you’re selling short a 1-2 year call against it. That cuts your price by ⅔ and increases your leverage by a factor of 3 and is a far greater risk/reward than just buying the 2-year call outright. If you want to learn more about LEAPS, send us an email about the Mad Hedge Concierge Service that is by application only.

Q: When is the recording up?

A: About two hours.

Q: Do you still love Freeport McMoRan (FCX)?

A: Yes, it’s taking the inflation vacation right now with the rest of the commodities, but I expect it to come roaring back by the end of the year. Electric vehicles need 200 pounds of copper compared to only 20 pounds for internal combustion cars.

Q: Thoughts on FireEye (FEYE)?

A: Yes, we love FireEye along with the rest of the cybersecurity plays, so buy on the dips. Hacking is a growth market and will never go out of fashion. BUY (PANW) and (HACK) on dips.

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 or TECHNOLOGY LETTER, 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