A man came at me with a crowbar last week.
I drove into Reno to buy some used backpacks for my Boy Scout troop and parked my Tesla in a nice residential neighborhood. Out of nowhere, a man ran down the street at me screaming profanities, crowbar in hand.
He shouted that I was from Antifa and that I had hired people to invade the Capitol Building to make President Trump look bad.
I reached into my car for my own crowbar. Then the local residents interceded, separating us. The man turned around and walked away, fuming.
“Who the heck was that?” I asked.
“He has mental issues,” said a neighbor. “We’ve had many problems with him before.”
Another said “He’s a Trump supporter. He saw your Tesla and thought you were a liberal.”
Wow! Looks like the nation has a very long way to heal.
Last year, the US defense budget amounted to $622 billion. When the greatest threat to congress in the nation’s history presented itself, it was antique chairs piled against the door that provided the best defense. Maybe we should ditch some big-ticket nuclear missiles and buy more chairs.
Of course, once the insurrection started on Wednesday, I was inundated with international calls from investors asking if they should pull all their money out of the US. I answered “NO” and that it was in fact time to double down. Those who did made a killing.
Ask any professional money manager what his reaction to a coup d’état in Washington would be, their response definitely would NOT be to run out and buy a ton of Tesla (TSLA). Yet, that was exactly the perfect thing to do, the stock soaring an astonishing $135, or 18% in two days. I have many followers who did exactly that and they made millions.
All I can say is that if a market gets hit with an insurrection, and exploding pandemic, and a crashing economy and only goes down 400 points and then bounces back the next day, you want to buy the hell out of it.
I’m talking about going on margin and taking a second mortgage on your home and pouring it into stocks. You might even consider going to a loan shark and borrowing at 18% because you can easily make double that in the right stocks.
After the Biden win and the Georgia sweep, there is now more rocket fuel pouring into the stock market than ever. Call it the “Biden blank check”. Estimates of new spending and subsidies about to hit the market now go up to $10 trillion. Let me list some of them:
*$2 trillion in enforced savings by locked up American consumers.
*Credit card balances have collapsed to multi-year lows, making available hundreds of billions in spending power.
*Trillions of Money market balances sitting on the sidelines yielding zero
*$908 billion stimulus package passed in the closing days of 2020
*A further $2 trillion stimulus package to pass shortly, including $2,000 checks for all 150 million US taxpayers.
*Add another $2 trillion infrastructure budget
*$1 trillion in student loan forgiveness for 10 million borrowers at $10,000 each
*Enormous subsidies for any alternative energy companies and Tesla cars
*The return of the deductibility of $1 trillion worth of state and local real estate taxes (known as (SALT)).
MUCH OF THIS CASH MOUNTAIN IS GOING STRAIGHT INTO THE STOCK MARKET!
It all sets up a stock market that has the potential to have “extreme” moves to the upside, according to my friend, Fundstrat’s Tom Lee.
All you need to retire early is someone to point you in the right direction, into the right sectors and the right stocks. Actually, I happen to know just the right person who can do that and that would be me!
Storming of the Capital shut down markets. After the initial crash, markets flatlined as the entire country dropped what they were doing and glued themselves to a TV, their jaws hanging open. The Dow dove 400 points, bonds and the US dollar stabilized, Tesla and oil took big hits, and gold and silver took off. The electoral college vote has been suspended, gunfights broke out on the house floor, and several explosive devices placed. Trump incited his followers to attack the capitol and they did exactly that. Washington DC is now subject to a 6:00 PM curfew for two weeks. Is this the beginning of the 2024 presidential election? It’s the worst day in Washington since the British burned it in 1814.
Democrats took Georgia, giving them Senate control and a blank check on spending for at least two years. Trump clearly blew the election for his party. My 3X short in bonds soared as the market crashed. Banks rocketed on a 10-basis point leap in interest rates. Infrastructure plays went ballistic. The US dollar faded. Add another couple of percentage points of US GDP growth for 2021.
Tesla Shorts posted biggest loss in history, setting on fire a staggering $38 billion in short positions. Many of these were financed by big oil looking to put Tesla out of business. The short interest in the stock has plunged from 37% to 5%. Did I mention that Tesla was the biggest Mad Hedge long of 2020? I’ve been buying it since it was a split-adjusted $3.30 a share in 2010 against a Friday close of $880, a gain of 290X. Elon Musk is now the richest man in the world and he’s only just getting started!
Tesla met its 500,000-unit 2020 target, far in excess of analyst forecasts. Q4 came in at a surprise 180,570 units. The firm’s 2021 target is 1.1 million units. The market Cap is about to touch $1 trillion, more than all of the global car industry combined. The Model 3 is doing the heavy lifting. Model Y production in Shanghai is about to ramp up and Berlin is to follow. If Tesla can mass-produce their solid-state batteries, they’ll attain a global monopoly in the car industry with 25 million units a year and a share price of $10,000.
A Saudi surprise production cut, a million barrels a day, sent oil over $50. But with demand that weak, how long can the rally last? The market is entering short-selling territory. I bet you didn’t use much gas today commuting from your bedroom to your home office. Use the rally to unload what energy you have left. Sell the (XLE) on rallies.
Bitcoin topped $42,000, more than doubling in a month, and exceeded $1 trillion as an asset class. A Biden-run economy means more money creation which has to find a home. My friend’s pizza purchase for 8 Bitcoin a decade ago is now worth $320,000. I hope it was good!
The Nonfarm Payroll came in at a loss of 140,000, giving more credence to the Q1 double-dip scenario and far worse than expected. The headline Unemployment Rate came in unchanged at 6.7%, Leisure & Hospitality lost a mind-blowing 498,000 and an incredible 3.9 million since January. Private Education lost 63,000 and Government 45,000. Professional & Business Services gained 161,000. The real U-6 Unemployment Rate is a very high 11.6%.
The bond crash has only just begun, with the (TLT) down $8 on the week. The risk/reward is the worst of any financial asset anywhere. I am maintaining my triple short position. Massive government borrowing will be a death knell for fixed income investors.
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 400% to 120,000 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 120,000 here we come!
My Mad Hedge Global Trading Dispatch closed out a blockbuster 2020 with a blockbuster 10.20% in December, taking me up to an eye-popping 66.64% for the year. I’m up 81% since the March low. In 2021, I shot out of the gate with an immediate 5.93% profit for the first four trading days of the year.
That brings my eleven-year total return to 428.48% double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.51%. My trailing one-year return exploded to 72.57%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 89% since the March low.
The coming week will be a slow one on the data front after last week's fireworks. We also need to keep an eye on the number of US Coronavirus cases at 22 million and deaths 370,000, which you can find here.
When the market starts to focus on this, we may have a problem.
On Monday, January 11 at 11:00 AM EST, US Inflation Expectations are released, which will increasingly become an area of interest.
On Tuesday, January 12 at 4:30 PM, API Crude Inventories are published.
On Wednesday, January 13 at 8:30 AM, the US Inflation Rate for December is announced.
On Thursday, January 14 at 8:30 AM, the Weekly Jobless Claims are published. We also get November Housing Starts.
On Friday, December 15 at 8:30 AM, December Retail Sales are printed. Q4 earnings seasons starts, with JP Morgan Chase (JPM) and Wells Fargo (WFC) reporting. At 2:00 PM we learn the Baker-Hughes Rig Count.
As for me, I’ll be taking my old Toyota Highlander down to the dealer in Reno. Squirrels moved into the engine and ate the wiring, knocking out the heater and the fan. All part of the cost of living in a mountain paradise. However, you have to share it with the critters.
I’ll also be investing in some pepper spray.
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
