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February 8 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the February 8 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: What do you make of the Chinese balloon that crossed the United States last week?

It was the most overhyped, least consequential event in recent memory, and is not a new thing. There is no chance this was an innocent scientific mission as there was no flight plan filed. What’s China’s new frontline weapon? A catapult? A bow and arrow? Are American balloon makers going to demand increased defense spending? Curiously, no mention was ever made of the three Chinese balloons that crossed the US during the previous administration when no action was taken. My guess is that a Chinese Army faction wanted to keep their defense spending rising and torpedoed any rapprochement that was in the works with the US. Another theory was that they wanted to test our response. There is nothing the balloon could have captured that the Chinese didn’t already have from their satellites or even Google Earth for free. The media coverage has been a flood of false information. If the Chinese really can predict global winds at 60,000 feet two weeks in advance, then their math is so far more advanced than our own then we might as well surrender. By the way, during WWII the Japanese sent 20,000 balloons our way in an attempt to set the Western US on fire. Only one exploded, killing a family in Oregon.

Q: I’m getting worried about my long-term LEAPS in (TLT) and (FCX) given the recent market action. Thanks in advance for your help.

A: The (TLT)'s should be OK by expiration because they hit max profit even in an unchanged bond market. But Republican radicals who want a government shutdown at any price are definitely going to rattle your cage. That’s why I currently have no short-term position in bonds and am waiting for a bigger pullback to maybe $101 before I get back in. As for Freeport McMoRan (FCX) you can take profits any time. The stock doubled after we recommended the LEAPS in October. Longer term, I think (FCX) goes to $100 because of a coming global copper shortage.

Q: Should I buy Royal Caribbean (RCL) because we’re looking at a record-breaking cruise season coming up this year?

A: The time to buy Royal Caribbean was actually last June; it was one of the first outperformers in the market, completely skipped the October meltdown, and is practically doubled off the low. So great idea, just 8 months too late. And that actually is the case with a lot of stocks now—they've had such enormous runs over a short time, that you’re taking a lot of risks to get involved here.

Q: Do you think Silicon Valley should force all workers back into the office? Wouldn't that enhance creativity?

A: It does enhance creativity but at the cost of productivity. People are much more productive when they work at home, don’t have to spend 2 hours commuting, and can build their job around their lifestyle. They work at home cheaper too. So, it’s a trade-off, do you want creativity or do you want productivity? Well, the productive people should stay at home, the creative people should go to the office—it’s a company by company, product by product decision.

Q: You say you never touch 2x and 3x ETFs?

A: The only exception to that is the ProShares UltraShort 20+ Year Treasury ETF (TBT) which we traded for 2.5 years while the bonds were making a straight line move down, or the ProShares Ultra Technology ETF (ROM) which tends to have straight up move like this year. And the only time you could do a 2x is if you think the move in the underlying is going to be so enormous it covers up all the costs of dealing in these ETFs, then it’s worth doing. 3xs I never ever touch them because those reset at the end of the day and are really designed to be intraday hedging instruments, which we’re not interested in.

Q: Are you still bearish on the US dollar (UUP)?

A: Absolutely, we’ve had almost a straight line move down ever since October, and we’re getting a temporary break on that while interest rates stay higher for longer. The next dive in interest rates, the dollar collapses once again.

Q: When you buy back into bonds, where in the curve will you be buying?

A: In bull markets, you always want to buy the longest maturity available. Back in the 1970s, I used to buy WWI infinite British Treasury bonds because they had 100-year maturities, and therefore, in any bull market, have the largest gains. In the US, the 30-year instruments are pretty illiquid, so I focus on the 10-year, which is the iShares 20 Plus Year Treasury Bond ETF (TLT).

Q: What could be the next entry point for Tesla (TSLA) LEAPS?

A: I’m afraid that we have left LEAPS land for Tesla, I mean $100, $110, $120, $130—that’s all LEAP territory. Up here? Not unless you want to do a very low return LEAP like a $150/$160. I don’t see Tesla going below $150. Too many people trying to get into the stock, and Elon Musk is a master at delivering short squeezes, which he has done a perfect job of this year.

Q: What do you think about Real Estate Investment Trusts (REITS)?

A: I love REITS. They are a falling interest rate play. Highly exposed to interest rates, highly leveraged, and you get some great performance—and we’ve already had some since October. I think the bear market in real estate ends this year and we get a new bull in housing that starts next year because we still have a chronic structural shortage of housing. We’re missing about 10 million houses that we need—in that situation, prices go up. In fact, there are still bidding wars going on in the prime residential (mostly rural) parts of the country.

Q: Wouldn’t you want to buy at-the-money calls, not spreads in a low Volatility Index ($VIX) market on a 4-6 month view, because of cheaper pricing?

A: Yes you do, but not on top of a record move to the upside. If we can get a pullback in the markets of a1 /3-1/2 of their recent moves, and the ($VIX) is still low, then that makes all the sense in the world, to buy at the money calls with ($VIX) of $17. The only problem is if we give up half the recent gains, you’re not going to have a ($VIX) at $17 anymore, it’ll be more like $27 if we get a pullback like that and options will be expensive again. It’s amazing how cheap upside exposure gets at market tops—that’s what the ($VIX) market is telling you. In other words, it’s a sucker’s bet. You can’t have your cake and eat it too.

Q: What do you think about Alphabet (GOOGL)?

A: It’s overbought like the rest of the stocks in the sector. But the charts are looking very attractive, with an upside breakout of the 200-day. Long-term, they have a killer business model, but they also have antitrust problems. Again, everything is way too overbought for me to get involved on a short-term basis.

Q: What price would you get in at for Berkshire Hathaway (BRK/B)?

A: It’s not selling off, it’s flatlining. So even a small dip like we had yesterday would be a decent place to get into. Long term we’re looking for $400/share for this by the end of this year.

Q: Will strong wage growth lead the Fed to raise interest rates higher?

A: Well they’ve already said essentially they’re going to do 2 more quarter point rises. Beyond that, the Fed itself doesn’t know. When you have interest rates at 10-20 year highs, and 3.4% unemployment. No one has ever seen that before, there is no playbook for what’s happening now—either in the economy or in the stock market. So everyone’s standing around, scratching their heads, trying to figure out what to do, and waiting for more data to come out to give direction. And I’m in the same position really.

Q: Will the US Treasury bond get down to a 2.0% yield by the end of the year?

A: I think it's a possibility but expect a lot of volatility and fears around prospects of a government shutdown this summer and a debt default. Part of the Republican party seems intent on forcing that, and that is not good for bond longs. You get through that, you could have an absolutely ballistic move up in the (TLT), to $120 or even $130.

Q: Would you consider a LEAPS on housing stocks?

A: LEAPS are things you do at multi-year market bottoms, not after 50% moves; and the housing stocks have actually been moving since June; so that was a June story. Buy low, sell high—it’s my revolutionary new concept; most people do the opposite.

Q: Should I invest in Disney (DIS) on a buy it on a Bob Iger turnaround?

A: Yes, but only on a dip; we’ve already had a massive move. If we don’t get a recession, that is fantastic for Disney’s park business.

Q: What is your target for Silver (SLV)?

A: $50/oz. We’re at $20 now. Silver is becoming the new industrial metal, far outstripping any jewelry demand that you used to have; and that’s because of EVs and solar. Who knew that we’re at 10 million homes with solar panels in California now? That is just an enormous number that’s happened mostly in the last five years.

Q: When you look at Natural Gas, would you consider LEAPS?

A: Yes, but I haven’t run the numbers yet. The price has gotten so low, down 80% in eight months that you buy it even if you hate it.

Q: Should I pay attention to demographics when I invest? What is the most important one right now?

A: Demographics are very important, because children born today become customers in 20 years, and companies will start adapting their policies for those customers now in terms of capital investments and so on. It also affects stock markets now. Also, you always want to invest in the country that had the fastest growing population, which used to be China but isn’t anymore. By the way, the reason the US economy has outperformed Europe by 1% a year in GDP growth for the last 70 years is because we allow immigrants, and they don’t. All parties used to be in favor of immigration while now only one is. Why, I don’t understand.

Q: What about a LEAP on Silver (SLV)?

A: That is a possible candidate because we have had a move, but it’s only been about 20%. It’s not like 50% or 100% like we’ve seen with Tesla (TSLA). There are a few asset classes that are still in LEAPS territory—I think Silver would be one of them, and certainly natural gas (UNG). If I were to do a LEAPS, I’d go out 2 years and do something like a $25-$27; the old high is $50. You should get about a 5x leverage on that kind of LEAPS.

Q: Would you buy LEAPS puts on Carvana (CVNA)?

A: Absolutely not. Again, another great one-year-ago idea, not a now idea. Buy Put LEAPS at extreme market tops, not now. Carvana had dropped 95% in the last year.

Q: Is seasonality an important consideration in your trading strategy?

A: Absolutely yes. If you buy stocks in November and do the sell-in-May strategy, your average annual return is something like 20% a year. If you buy stocks in May and sell them in December, the 70-year return on that is zero. I love having the tailwind of seasonality; I can’t remember seeing it when it didn’t work. It’s an important consideration, and we’re right in the middle of the “BUY” season and the market is agreeing with me.

Q: You should do a LEAPS letter.

A: I already do in fact do a LEAPS letter, and it’s called the Mad Hedge Concierge Service where we have a whole website dedicated to just LEAPS. Some ten out of 12 made money last year, and some went up 10X. Contact customer support at support@madhedgefundtrader.com if you’re interested. Concierge members are very happy with their LEAPS coverage.

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 12 years are there in all their glory.

Good Luck and Stay Healthy,

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

At 29 Palms in my M1 Abrams Tank in 2000

February 6, 2023

Diary, Newsletter, Summary

Global Market Comments
February 6, 2023
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or WELCOME TO THE WHIPSAW)
(SPY), (TLT), (TSLA), (QQQ), (DOCU), (META), (AMZN)

CLICK HERE to download today's position sheet.

Note: We are moving webinar platforms to Zoom for the February 8, 12:00 EST Mad Hedge Biweekly Strategy

Webinar. To join, please click here.

The Market Outlook for the Week Ahead, or Welcome to the Whipsaw

Diary, Newsletter

Well, that was some week!

The next time there is a Fed interest rate announcement, earnings from all the big tech companies, and a Nonfarm Payroll Report all within five days, I am going to call in sick, volunteer at the Oakland Food Bank, or explore some remote Pacific island!

For good measure, a top-secret Chinese spy balloon passed overhead before it was shot down, which I was able to read all about in USA Today.

Still, when you live life in the front trenches and on the cutting edge and use the kind of leverage that I do, you are going to take hits. It’s all a cost of doing business. If you can’t stand the heat, get out of the kitchen.

The last month in the markets have seen one of the greatest whipsaws of all time. Many leading stocks are up 40%-100%, while the Volatility Index ($VIX) plunged to a two-year low. Stocks have gone from zero bid to zero offered. The bulls are back in charge, for now.

Go figure.

This year has proved full of flocks of black swans so far, with February setting me back -5.70%. My 2023 year-to-date performance is still at the top at +16.65%. The S&P 500 (SPY) is up +9.92% so far in 2023. My trailing one-year return maintains a sky-high +84.10%.

That brings my 15-year total return to +613.84%, some 2.59 times the S&P 500 (SPX) over the same period. My average annualized return has retreated to +46.62%, still the highest in the industry.

Last week, I got stopped out of my short position in the (QQQ), in what will hopefully be my biggest loss of the year, but not the last. Once or twice a year, you get a major gap opening that takes you through one, and sometimes two full strike prices, taking you to the cleaners, and this was one of those times. It takes three more winning trades to make up for these.

I also took small profits on my remaining long in Apple (AAPL). That leaves me 80% in cash, with a double short in Tesla (TSLA). Markets are wildly overextended here with my own Mad Hedge Market Timing Index well into “SELL” territory at 76. Tread at your own peril. Cash is king right here.

Growth stocks are on fire and small caps have been prospering, all classic bull market indicators. This has triggered panic short covering by hedge funds which have seen their worst start to a New Year in decades. The old pros are getting carried out on stretchers.

Maybe this is a good time to hire some kid to do your trading, like one who has never seen markets go down before, one who started his career only on January 1? Or maybe one who retired on December 31 2021, and took a year off?

So, what are markets trying to tell us? That in an hour, the view of the economy has flipped from a mild recession to a soft landing? That interest rates don’t matter anymore? That big chunks of the economy can operate without outside money? That big tech will always make money, it will just rotate from large profits to small ones and back to outrageous ones again?

Those who instead bet on a severe recession are currently filling out their applications as Uber drivers. Warning: it’s harder than it used to be, no more fake IDs or salvage title cars. Next, they’ll want your DNA sample.

If it is any consolation, Fed governor Jay Powell hasn’t a clue about what’s happening either, and that’s with 100 PhD's in economics on his staff. He was just as flummoxed as we over a January Nonfarm Payroll Report that came in 2.5 X expectations on top of 4.5% in interest rate hikes.

Clearly, a new economy has emerged from the wreckage of the pandemic, and no one, not anyone, has quite figured out what it is yet.

Some ten years’ worth of economic evolution has been pulled forward. Everything is digitizing at an astonishing rate. What do I do after slaving away in front of a computer all day? Go back to my computer to have fun. Lots of “zeros” and “ones” there.

It looks like we get a new stock market too.

All of this frenetic market action does fit one theory that I spelled out for you in great detail last week. It is that technology stocks are about to spin off such immense profits that it is about to replace the Fed as a new immense supply of free money.

META up 20% in a day? That’s what it says to me. Notice that Mark Zuckerberg mentioned “AI” 16 times in his earnings call.

Is it possible that I nailed this one….again?

On another related topic, the last three months have just given us a wonderful illustration of how well the Mad Hedge Market Timing Index works (see chart below). We got a strong BUY at an Index reading of 30 on December 22, when the (SPY) began a robust 12% move up. We are now at the top end of an upward trend with my Index at 76. You’d be Mad to add a long position here, at least for the short term.

Someone asked me the other day if the algorithm has gotten smarter in the seven years I have been using it. The answer is absolutely “yes,” and you can see it in my performance. During this time, my average annualized return has jumped from 31% to 46%. That’s because the algorithm gets smarter with the hundreds of new data points that are added every day. Believe it or not, this is how much of the economy is run now.

But there is another factor. I get smarter every year. Believe it or not, when you go from year 54 to 55, you actually learn quite a lot about the markets. Of course, markets are evolving all the time and the rate of change is accelerating. When I saw the market moving towards algorithms, I wrote an algorithm. The challenge is to solve each new problem the market throws at you every year, which I love doing.

Nonfarm Payroll Report at 513,000 Blows Away Estimates, more than double expectations. The Headline Unemployment Rate fell to a new 53-year low at 3.4%. Leisure & Hospitality gained an incredible 128,000, Professional & Business Services 82,000, and Government 74,000. You can kiss that interest rate cut goodbye. Bonds believe it, down 3 points, but stocks are still in Lalaland, reversing a 300-point reversal in the (QQQ)s.

Fed Raises Rates 25 basis points, but Powell talks hawkish, smashing stocks for an hour. He needs more evidence that inflation is finally headed down. He might as well have said he’ll burn the place down. One or two more rate rises to go before the pivot.

Weekly Jobless Claims Hit New 9 Month Low, at 183,000, down 3,000, and is close to a multi-generational low. A recession is rapidly moving off the table as today’s move in tech stocks indicates.

JOLTS Surges Past 11 Million Job Openings in December to a five-month high. The Fed’s assault on labor clearly isn’t working. The million who died from Covid certainly aren’t coming back to work, nor are the 500,000 long Covid cases. That’s 1% of the US workforce.

Ukraine War is Accelerating Move to Green Energy, or so thinks British Petroleum, cutting its ten-year energy demand forecast. Russian energy has proven unreliable at best, and the key pipelines have been blown up anyway. Massive subsidies have been unleashed in Europe and the US for solar, wind, EVs, hydro, and even nuclear. The war gave coal a respite from oblivion, but only a temporary one.

S&P Case Shiller Drops to an 8.6% Annual Gain, the National Home Price Index falling for five consecutive months. No green shoots here. The deeply lagging indicator may not turn positive until yearend. Miami, Tampa, and Atlanta showed the biggest gains, with San Francisco the biggest loser.

Office Occupancy Recovers to 50%, according to a private research firm. New York, San Jose, and San Francisco are still lagging. With the work-from-home trend and high interest rates, commercial properties have entered a perfect storm. Austin, TX was the highest at 68%.

Europe Delivers Surprising Q4 Growth, despite WWIII playing out on its doorstep. GDP increased by 0.1% when a decline was expected. European stocks should outperform American ones in 2023.

IMF Upgrades Global Growth Forecast for 2023 to 2.9% and sees a modest recovery in 2024. The figures are an improvement from the last report, thanks to falling inflation and energy prices. China ending lockdowns is another plus.

General Motors to Invest $650 Million in Lithium Americas, pouring money into a Nevada mine at Thacker Pass, the largest such US investment so far. (GM) says it will raise EV production to 400,000 this year versus 120,000 for all of 2022. Good luck because local environmental opposition to the new mine has been enormous. Goodbye China.

My Ten-Year View

When we come out the other side of the recession, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. The economy decarbonizing and technology hyper accelerating, creating enormous investment opportunities. The Dow Average will rise by 800% to 240,000 or more in the coming decade. The new America will be far more efficient and profitable than the old. Dow 240,000 here we come!

On Monday, February 6, no data of note is announced.

On Tuesday, February 7 January 31 at 5:30 AM EST, the Balance of Trade is out.

On Wednesday, February 8 at 7:30 AM, the Crude Oil Stocks are published.

On Thursday, February 9 at 8:30 AM, the Weekly Jobless Claims are announced.

On Friday, February 10 at 8:30 AM, the University of Michigan Consumer Sentiment is printed. At 2:00 the Baker Hughes Oil Rig Count is out.

As for me, the telephone call went out amongst the family with lightning speed, and this was back in 1962 when long-distance calls cost a fortune. President Dwight D. Eisenhower was going to visit my grandfather’s cactus garden in Indio the next day, said to be the largest in the country, and family members were invited.

I spent much of my childhood in the 1950s and 1960s helping grandpa look for rare cactus in California’s lower Colorado Desert, where General Patton trained before invading Africa. That involved a lot of digging out a GM pickup truck from deep sand in the remorseless heat. SUVs hadn’t been invented yet, and a Willys Jeep (click here) was the only four-wheel drive then available in the US.

I have met nine of the last 13 presidents, but Eisenhower was my favorite. He certainly made an impression on me as a ten-year-old boy, who I remember as a kindly old man.

I walked with Eisenhower and my grandfather plant by plant, me giving him the Latin name for its genus and species, and citing unique characteristics and uses by the Indians. The former president showed great interest and in two hours we covered the entire garden. I still make my kids learn the Latin names of plants.

Eisenhower lived on a remote farm at the famous Gettysburg, PA battlefield given to him by a grateful nation. But the winters there were harsh so he often visited the Palm Springs mansion of TV Guide publisher Walter Annenberg, a major campaign donor.

Eisenhower was one of the kind of brilliant men that America always comes up with when it needs them the most. He learned the ropes serving as Douglas MacArthur’s Chief of Staff during the 1930s. Franklin Roosevelt picked him out of 100 possible generals to head the allied invasion of Europe, even though he had no combat experience.

After the war, both the Democratic and Republican parties recruited him as a candidate for the 1952 election. The latter prevailed, and “Ike” served two terms, defeating the governor of Illinois Adlai Stevenson twice. During his time, he ended the Korean War, started the battle over civil rights at Little Rock, began the Interstate Highway System, and admitted Hawaii as the 50^th state.

As my dad was very senior in the Republican Party in Southern California during the 1950s, I got to meet many of the bigwigs of the day. New York prosecutor Thomas Dewy ran for president twice, against Roosevelt and Truman, and was a cold fish and aloof. Barry Goldwater was friends with everyone and a decorated bomber pilot during the war.

Richard Nixon would do anything to get ahead, and it was said that even his friends despised him. He let the Vietnam War drag out five years too long when it was clear we were leaving. Some 21 guys I went to high school with died in Vietnam during this time. I missed Kennedy and Johnson. Wrong party and they died too soon. Ford was a decent man and I even went to church with him once, but the Nixon pardon ended his political future.

Peanut farmer Carter was characterized as an idealistic wimp. But the last time I checked, the Navy didn’t hire wimps as nuclear submarine commanders. He did offer to appoint me Deputy Assistant Secretary of the Treasury for International Affairs, but I turned him down because I thought the $15,000 salary was too low. There were not a lot of Japanese-speaking experts on the Japanese steel industry around in those days. Biggest mistake I ever made.

Ronald Reagan’s economic policies drove me nuts and led to today’s giant deficits, which was a big deal if you worked for The Economist. But he always had a clever dirty joke at hand which he delivered to great effect….always off camera. The tough guy Reagan you saw on TV was all acting. His big accomplishment was to not drop the ball when it was handed to him to end the Cold War.

I saw quite a lot of George Bush, Sr. who I met with my Medal of Honor Uncle Mitch Paige at WWII anniversaries, who was a gentleman and fellow pilot. Clinton was definitely a “good old boy” from Arkansas, a glad-hander, and an incredible campaigner, but was also a Rhodes Scholar. His networking skills were incredible. George Bush, Jr. I missed as he never came to California. And 22 years later we are still fighting in the Middle East.

Obama was a very smart man and his wife Michelle even smarter. Stocks went up 400% on his watch and Mad Hedge Fund Trader prospered mightily. But I thought a black president of the United States was 50 years early. How wrong was I. Trump I already knew too much about from when I was a New York banker.

As for Biden, I have no opinion. I never met the man. He lives on the other side of the country. When I covered the Senate for The Economist, he was a junior member.

Still, it’s pretty amazing that I met 9 out of the last 13 presidents. That’s 20% of all the presidents since George Washington. I bet only a handful of people have done that and the rest all live in Washington DC. And I’m a nobody, just an ordinary guy. It just makes you think about the possibilities.

Really.

It’s Been a Long Road

February 3, 2023

Diary, Newsletter, Summary

Global Market Comments
February 3, 2023
Fiat Lux

Featured Trade:

(QUEEN MARY II JULY 13 SEMINAR AT SEA)
(SOME BASIC TRICKS FOR TRADING OPTIONS)

CLICK HERE to download today's position sheet.

February 2, 2023

Diary, Newsletter, Summary

Global Market Comments
February 2, 2023
Fiat Lux

Featured Trade:

(TESTIMONIAL)
(HOW THE COST OF ENERGY IS GOING TO ZERO),
(SPWR), (TSLA),

CLICK HERE to download today's position sheet.

How the Cost of Energy is Going to Zero

Diary, Newsletter

A key part of my argument for a new Golden Age to take place during the coming Roaring Twenties is that the price of energy is going to zero.

It may not actually make it to zero. I’ll settle for a 90%-95% decline, which is good enough for me.

Take a look at the charts below.

The first one shows how the price of a watt of solar-generated electricity has plunged by 99.60% since 1977, from $76.67 to $0.30.

Just in the past six years, retail prices for completed solar panels dropped by a staggering 80%.

That is cheaper than electricity supplies generated by new natural gas plants, which now cost 7 cents per kWh.

Squeezing efficiencies out of our existing solar technology through improved software, production methods, chemistry, and design are nearly unlimited, and are expected to drive solar costs by half down to 3 cents per kWh by 2035.

And here is the great shortcoming of all these wonderful predictions. Technology NEVER stays the same.

My own SunPower (SPWR) panels with their Maxeon solar cell technology deliver an efficiency of 22.7%, the best on the market available 18 months ago. That means that convert 22.7% of the solar energy they receive into electricity.

SunPower is now producing 25.1% efficiency panels in the lab. Another research lab in Germany, Fraunhofer, is getting 44.7%.

And my friends at the Defense Department tell me they have functioning solar cells delivering 70% efficiencies. Whether they are economic and scalable is anyone’s guess.

(Warning: most cheap Chinese-made solar cells have only lowly 15% efficiencies, so don’t be tricked by any great “deals”).

And this is how most long-term predictions fall short.

Not only do they assume that technology doesn’t change, they fail to account for dramatic improvements in other related fields.

Electric car technology is a classic example. Battery costs are currently falling off a cliff.

When I bought the first Nissan Leaf offered for sale in California in 2010, the battery cost $833 per kilowatt. In 2012, I purchased a high-performance Tesla (TSLA) P85 Model S-1 at $353 per kilowatt. My last purchase in 2018 of a Tesla Model X P100D further dropped the cost to $150.

Efficiencies gained through the economies of scale from the Sparks, Nevada Gigafactory could take that down to under $100. From $833 down to $100, not bad.

However, that is not the end of the story.

The car industry will start to move towards carbon fiber in five years, which has five times the strength of steel at one-tenth the weight. The only issue now is mass production cost.

Some 67% of the weight of a Tesla S-1 is in the body, with the four motors at 13%, and the 1,200-pound lithium-ion battery at 20%.

What happens when the body weight falls by 90%? The battery weight, and cost decline by two-thirds. That cuts the effective cost of the battery to $66/kilowatt.

Add up all of this, and it is easy to see how energy costs can plunge by 90% or more. And it will happen must faster than you expect.

This has been the experience with memory costs, processor speeds, and hundreds of other technologies over the past half-century I have been following them.

I could go on and on.

This is why the State of California has mandated to get 50% of its energy from alternative sources by 2030. Some researchers believe an 80% target could be achieved. And it is doing this while closing its two remaining nuclear power plants.

To say that free energy would be a game-changer is a huge understatement.

The elimination of energy as a cost has enormous consequences for all companies. You can start with the energy-intensive ones in transportation, steel, and aluminum, and work your way down the list.

My bet is that you won’t recognize the car industry in 20 years. At a $66/kilowatt effective battery cost, it will make absolutely no sense to build internal combustion engines in new cars. Too bad Detroit is a decade behind in this technology.

Lose transportation, and you lose 50% of US oil consumption, or about 10 million barrels a day. Guess what that does to oil prices.

Goodbye Middle East and Russia.

The profitability and efficiency of the entire economy will take a great leap forward, much like we saw with the mass industrialization that was first made possible by electricity during the 1920s.

Share prices of all kinds will go ballistic.

Since energy costs will eventually fall effectively to zero, that wipes out the present business model of the entire electric power, coal, oil, and gas industries, about 10% of US GDP.

Their business models will be reduced to trying to sell something that is free, like air.

Dow 240,000 anyone?

For more about the economic rationale behind these predictions, please read my book, Stocks to Buy for the Coming Roaring Twenties.

Getting Ready for the 2020s

Enough Batteries to Operate Grid-Free Forever!

January 30, 2023

Diary, Newsletter, Summary

Global Market Comments
January 30, 2023
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or MY NEW THEORY OF EQUITIES)
(TSLA), (SPY), (TLT), (TSLA), (OXY), (UUP), (AAPL), ($VIX)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or My New Theory of Equities

Diary, Newsletter

After 54 years of trading, and 60 if you count my paper boy days, I have never seen the conventional wisdom be so wrong about the markets.

There was near universal sentiment that we would crash come January. Instead, with have only seen four down days this year. The shorts got slaughtered.

So it’s clear that something brand new is going on here in the markets. I call it “My New Theory of Equities.”

I always have a new theory of equities. That’s the only way to stay ahead of the unwashed masses and live on the cutting edge. After all, I don’t have to run faster than the bear, just faster than the competition to keep you making money.

So here is my new theory.

Many strategists are bemoaning the loss of the free money that zero interest rates made available for the last decade. They are convinced that we will never see zero interest rates again.

But guess what? Markets are acting like free money is about to return, and a lot faster than you think. Free money isn’t gone forever, it is just taking a much-needed vacation.

What if free money comes from somewhere else? You can forget about free money from the government. Fear of inflation has ended that source, unless we get another pandemic, which is at least a decade off.

No, I found another source of free money, and that would be exponentially growing technology profits. Those who don’t live in Silicon Valley are ignorant of the fact that technology here is hyper accelerating and tech companies are becoming much more profitable.

You know those 80,000 tech workers who just got laid off? They all averaged two job offers each from the thousands of startup companies operating from garages and extra bedrooms all around the Bay Area. As a result, the Silicon Valley unemployment rate is well under 2%, nearly half the national average.

I bet you didn’t know that there are over 100 industrial agricultural startups here growing food in indoor ultraviolet lit lowers. It turns out that these use one tenth of the inputs of a conventional input, like water and fertilizer in half the time.

There are hundreds of solar startups in play, many venture capital financed by Saudi Arabia. While the kingdom has a lot of oil, they have even more sunshine. And what are they going to do with all that oil? Use solar generated electricity to convert it to hydrogen to sell to us as “green” energy.

Solar itself will just be a bridge technology to fusion, which you may have heard about lately. What happens when energy becomes free? It boggles the mind. This appears to be a distant goal now. But remember that we went from atomic bombs to nuclear power plants in only 12 years, the first commercially viable one supplying electricity to Pittsburgh in 1957 (click here for the link).

The future happens fast, far faster than we realize. Always.

Here is another anomaly for you. While these massive tech layoffs have been occurring, Weekly Jobless Claims have plunged to a two-year low from 240,000 to only 186,000.

That is because tech workers aren’t like you and me. When they get laid off the first thing, they do is cheer, then take a trip to Europe. They are too wealthy to qualify for unemployment benefits, so they never apply. When they get home, they immediately get new jobs that pay more money with extra stock options.

I know because I have three kids working in Silicon Valley and enjoy a never-ending stream of inside dope.

This means that you need to be loading the boat with tech stocks on every major dip for the rest of your life, or at least my life. The profit opportunities are exponential.

This creates a new dilemma.

You can pick up the easy doubles and triples now just though buying listed companies. But many of the hundred and thousand baggers haven’t even been created yet. That’s where newly unemployed tech workers are flocking to. That’s where you’ll find the next Tesla (TSLA) at $2 trade.

How will you find those? Don’t worry, that’s my job. After all, I found the last Tesla at $2, minting many new millionaires along the way.

My trading performance certainly shows the possibilities of this My New Theory of Equities, which so far in January has tacked on a robust +19.94%. My 2023 year-to-date performance is the same at +19.94%, a spectacular new high. The S&P 500 (SPY) is up +7.32% so far in 2023.

It is the greatest outperformance on an index since Mad Hedge Fund Trader started 15 years ago. My trailing one-year return maintains a sky-high +95.09%.

That brings my 15-year total return to +617.13%, some 2.66 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +46.87%, easily the highest in the industry.

Last week, I took profits on my longs in Tesla (TSLA) and Occidental Petroleum (OXY). That leaves me 90% in cash, with one lonely 10% short in the (QQQ). Markets are wildly overextended here; the Volatility Index ($VIX) is at a two-year low at $18, and my own Mad Hedge Market Timing Index is well into “SELL” territory at 70.

My invitation on the long side is wearing thin.

And while I’m at it, let me introduce one of my favorite secret economic indicators.

I call it the “Flat Tire Indicator”.

It goes something like this. The stronger the economy, the more trucks you have driving to new construction sites to build factories and homes. That means more trucks wearing out the roads, creating more potholes, and bouncing more nails out the back.

Tadah! You get more flat tires.

I am not citing this as some Ivory Tower, pie-in-the-sky academic theory. I spent the morning getting a flat tire on my Tesla Model X fixed. This wasn’t just any old tire I could pick up on sale at Big O Tires. It was a Pirelli Scorpion Zero 265/35 R22 All Season staggered racing tire.

Still, Tesla did well. From the time I typed in my request on the Tesla app on my smartphone to the time the repair was completed at my home, only 45 minutes had elapsed.

Still, $500 for a tire Elon? Really?

Elon Musk Ambushed the shorts, with a Massive Short Squeeze Hitting Tesla, up 80% in three weeks and far and away the top-performing major stock of 2023. Tesla now accounts for an incredible 7% of the entire options market. Bearish hedge funds are panicking. It’s dragging the rest of big tech with it. I think we are due for a rest around the Fed interest rates decision in three days. I warned you about an onslaught of good news coming out about Tesla. It has arrived!

Will This Week See the Last Interest Rate Hike, in this cycle on February 1? That’s what stocks seem to be discounting now, with the major indexes up almost every day this year. And even next week may only deliver a 25-basis point hike.

The Fed’s Favorite Inflation Indicator Fell in December, Core PCE up only 4.4% YOY. It’s fanned the tech flames for a few more days. The University of Michigan is calling for only 3.9%.

Q4 GDP is Up 2.9%, far higher than expected. This is becoming the recession that may not show. New car sales went ballistic and there were huge orders for Boeing. Bonds sold off on the news.

Recession Risk Falls, from a 98% probability to only 73% according to an advanced model from JP Morgan Bank. Other models say it’s dropped to only 50%. A soft landing is now becoming the conventional view. The view is most clearly seen in high-yield bonds which have recently seen interest rates plunge. This may become the recession that never happens.

Tech Layoffs Top 75,000, or 2% of the tech workforce. Most get two job offers on hitting the street from the thousands of garage startups percolating in San Francisco Bay Area garages, taking the Silicon Valley unemployment rate below 2%. All tech is losing is the froth it picked up during the pandemic. As I tell my kids, you want to work in the industry where 2% of the US population spin off 35% of America’s profits. Buy big tech on the coming dips.

Tesla Price Cuts Crush the EV Industry, in a clear grab by Elon for market share, already at 65% globally. Teslas are now the cheapest EVs in the world on a per mile basis, and with the new federal subsidies they now qualify for the discount rises to 35%. (GM), (F), and Volkswagen can’t match the cuts because they are already hemorrhaging money on EVs and lack the parts to appreciably boost production. Keep buying (TSLA) on dips, which is up $8 this morning.

Tesla Beats, on both earnings and guidance. It’s looking for 1.8 million vehicles sold in 2023 versus 2022 sales of 1.31 million. Elon is still planning on 50% annual growth over the foreseeable future. The shares jumped an incredible 12% on the news. The Cybertruck will roll out at the end of this year, and I am on the list. The recent price cuts were hugely successful, killing the EV competition, and could take 2023 production to 2 million. It all makes (TSLA) a strong buy and long-term hold on the next $20 dip.

China is Taking Over the Auto World and is the only country that outsold the US in EVs. The Middle Kingdom exported more than 2.5 million cars last year, taking it just behind Germany. The country is targeting 8 million exports by 2030, double Japan’s. What is not said is that most of these will go to low waged emerging countries without auto regulations, safety standards, or even laws. No Chinese cars were sold in the US, far and away the world’s largest market at 15 million units last year in a global market of 67.6 million.

Pending Home Sales Jump in December, up 2.5%, providing more green shoots for the real estate market. This is on a signed contracts-only basis, the best in 14 months. The January numbers will get a huge boost from dramatically lower mortgage rates.

My Ten-Year View

Dow 240,000 here we come!

On Monday, January 30 a6 7:30 AM EST, the Dallas Fed Manufacturing Index is announced. NXP Semiconductor (NXPI) reports.

On Tuesday, January 31 at 6:00 AM, the S&P Case Shiller National Home Price Index is updated. Caterpillar (CAT) reports.

On Wednesday, February 1 at 7:00 AM EST, the JOLTS Private Sector Job Openings are released. The Fed Interest Rate Decision is disclosed. Meta (META) reports.

On Thursday, February 2 at 8:30 AM EST, the Weekly Jobless Claims are announced. Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL) report.

On Friday, February 3 at 8:30 AM EST, the January Nonfarm Payroll Report is printed. Regeneron (REGN) reports.

At 2:00 the Baker Hughes Oil Rig Count is out.

As for me, when Anne Wijcicki founded 23andMe in 2007, I was not surprised. As a DNA sequencing pioneer at UCLA, I had been expecting it for 35 years. It just came 70 years sooner than I expected.

For a mere $99 back then they could analyze your DNA, learn your family history, and be apprised of your genetic medical risks. But there were also risks. Some early customers learned that their father wasn’t their real father, learned of unknown brothers and sisters, that they had over 100 brothers and sisters (gotta love that Berkeley water polo team!) and other dark family secrets.

So, when someone finally gave me a kit as a birthday present, I proceeded with some foreboding. My mother spent 40 years tracing our family back 1,000 years all the way back to the 1086 English Domesday Book (click here).

I thought it would be interesting to learn how much was actually fact and how much fiction. Suffice it to say that while many questions were answered, alarming new ones were raised.

It turns out that I am descended from a man who lived in Africa 275,000 years ago. I have 311 genes that came from a Neanderthal. I am descended from a woman who lived in the Caucuses 30,000 year ago, which became the foundation of the European race.

I am 13.7% French and German, 13.4% British and Irish, and 1.4% North African (the Moors occupied Sicily for 200 years). Oh, and I am 50% less likely to be a vegetarian (I grew up on a cattle ranch).

I am related to King Louis XVI of France, who was beheaded during the French Revolution, thus explaining my love of Bordeaux wines, Chanel dresses, and pate foie gras.

Although both my grandparents were Italian, making me 50% Italian, I learned there is no such thing as a pure Italian. I come it at only 40.7% Italian. That’s because a DNA test captures not only my Italian roots, plus everyone who has invaded Italy over the past 250,000 years, which is pretty much everyone.

The real question arose over my native American roots. I am one sixteenth Cherokee Indian according to family lore, so my DNA reading should have come in at 6.25%. Instead. It showed only 3.25% and that launched a prolonged and determined search.

I discovered that my French ancestors in Carondelet, MO, now a suburb of Saint Louis, learned of rich farmland and easy pickings of gold in California and joined a wagon train headed there in 1866. The train was massacred in Kansas. The adults were massacred, and all the young children adopted into the tribe, including my great X 5 Grandfather Alf Carlat and his brother, then aged four and five.

When the Indian Wars ended in the 1870s, all captives were returned. Alf was taken in by a missionary and sent to an eastern seminary to become a minister. He then returned to the Cherokees to convert them to Christianity. By then Alf was in his late twenties so he married a Cherokee woman, baptized her, and gave her the name of Minto, as was the practice of the day.

After a great effort, my mother found a picture of Alf & Minto Carlat taken shortly after. You can see that Alf is wearing a tie pin with the letter “C” for his last name of Carlat. We puzzled over the picture for decades. Was Minto French or Cherokee? You can decide yourself.

Then 23andMe delivered the answer. Aha! She was both French and Cherokee, descended from a mountain man who roamed the western wilderness in the 1840s. That is what diluted my own Cherokee DNA from 6.50% to 3.25%. And thus, the mystery was solved.

The story has a happy ending. During the 1904 World’s Fair in St. Louis (of Meet me in St. Louis fame), Alf, then 46 placed an ad in the newspaper looking for anyone missing a brother from the 1866 Kansas massacre. He ran the ad for three months and on the very last day his brother answered and the two were reunited, both families in tow.

Today, it costs $169 to get you DNA analyzed, but with a much larger data base it is far more thorough. To do so click here at https://www.23andme.com

My DNA has Gotten Around

It All Started in East Africa

1880 Alf & Minto Carlat, Great X 5 Grandparents

My New Coincident Economic Indicator

January 27, 2023

Diary, Newsletter, Summary

Global Market Comments
January 27, 2023
Fiat Lux

Featured Trade:

(JANUARY 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(RIVN), ($VIX), (SPX), (UUP), (NVDA), (TLT), (LLY), (AAPL), (RTX), (LMT), (USO), (OXY), (TSLA), (UNG), (MSFT)

CLICK HERE to download today's position sheet.

January 25 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the January 25 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: What do you think about LEAPS on Rivian (RIVN)?

A: Yes, I would do those, but a smaller position with closer strike prices. Go to the maximum maturity 2 years out and be conservative—bet on only a 50% rise in the stock. I’m sure it’ll double, but with the LEAPS you’ll have tremendous upside leverage, like 10 to 1, so don’t get greedy. Go for the 500% profit in 2 years rather than the 1,000%, because it is still a startup, and we need economic recovery for startups to get traction. If anything, Tesla (TSLA) will drag this stock back up as it dragged it down. They all move together.

Q: What’s the number of contracts on your $100,000 model portfolio?

A: Our model portfolio basically assumes we have 10 positions of $10,000 each totaling $100,000 in value. You can then change the number of contracts to suit your own private portfolio—take on as much or as little risk as you want. If you’re new. I recommend trading on paper first to make sure you can make money before you use the real thing.

Q: I’m new to this service. What’s the difference between the long-term portfolio and the short-term portfolio?

A: A long term portfolio is a buy-and-forget portfolio, with maybe a 5- or 10-year view. We only change it and make adjustments twice a year so we can average back into the new positions and take profits on the old ones. The main part of this service is usually front-month, and that’s where we take advantage of anomalies in the options market and market timing to make profits 95% of the time. And a big part of the short-term portfolio is cash; we often go 100% cash when there are no trades to be had. It’s actually more valuable knowing when not to trade than when to trade. If you have any more questions, just email customer support at support@madhedgefundtrader.com and we’ll address them individually.

Q: Is it time for a CBOE Volatility Index ($VIX) trade?

A: I hate trading ($VIX). I only do it from the short side; when you get down to these low levels it can flatline for several months, and the time decay eats you to death. I only do it from the short side, and then only the 5% of the time that we’re peaking in ($VIX). The big money is made on the short side, that’s how virtually the entire options trading industry trades this.

Q: Would you be loading up with LEAPS in February?

A: No, it’s the worst time to do LEAPS. You do LEAPS at long-term market bottoms like we had in October, and then we issued 12 different LEAPS. If you get a smaller pullback, there may be LEAPS opportunities, but only in sectors that are near all-time lows, like gold or silver. It depends on the industry and where we are in the market, but basically, you’re looking to do LEAPS at lows for the year because the leverage is so enormous, and so are the potential profits.

Q: Is the increasing good performance a result of your artificial intelligence? Learning from past mistakes?

A: Partly yes, and partly my own intelligence is improving. Believe it or not, when you go from year 54 to 55 in experience in the markets, you understand a lot more about the markets. Sometimes you just get lucky being on the right side of black swan events. Of course, knowing when the market is especially sensitive and prone to black swans is also a handy skill to have.

Q: Is it too late to get into Freeport McMoRan (FCX)?

A: Yes, I wouldn’t touch (FCX) until we get at least a $10 selloff, which we may get in February, so I think the long term target for (FCX) is $100. The stock has nearly doubled since the LEAPS went out in October from $25 a share to almost $50, so that train has left the station. Better off to wait for the next train or find another stock, there are a lot of them.

Q: Where do you park cash in the holding pattern?

A: Very professional hedge fund managers buy 90-day T-bills, because if you keep your cash in your brokerage account—their cash account—and they go bankrupt, it’ll take you 3 years to get your money back in a bankruptcy proceeding. If you own 90-day T-bills and your broker goes bankrupt, they’re required by law to just hand over the T-bills to you immediately. You take delivery of the T-bills, you park them at another brokerage house, and you keep them there. There is no loss of the use of funds.

Q: What about Long term US dollar (UUP)?

A: We go down for 10 years. Falling interest rates are poison for a currency; our rates are probably going to be falling for the next several years.

Q: Thoughts on Tesla (TSLA)?

A: Short term way overbought, we almost got up 60% from the low in weeks, but that’s Tesla, that’s just how it trades. It is the best performing major stock in the market this year. I wouldn’t be looking to go back into it until we drop back, give up half of that gain, get back down to about $135—then it would be a good options trade and a good LEAPS.

Q: Would you be taking profits in Nvidia (NVDA)?

A: I would take like half here and look to buy it back on the next dip because I think Nvidia’s got higher highs ahead of it.

Q: I can’t get a password for the website.

A: Please contact customer support on the homepage and they will set you up immediately. If not, you can call them at (347) 480-1034.

Q: Would you be selling long term positions?

A: No I would not, because if you sell a long term position they’re very hard to get back into; and I’m expecting $4,800 in the (SPX) by the end of the year. Everything goes up by the end of the year, even things you hate. So no, selling is what you did a year ago, now you’re basically looking for chances to get back in.

Q: Would you hold Tesla (TSLA) over this earnings report?

A: No, I sold my position yesterday, at 70% of its maximum potential profit. I don't need substantial selloff; I’m just going to go right back in again.

Q: Have you heard anything about Tesla silicon roof tiles tending to catch fire?

A: No I have not, but if your house got struck by lightning or if someone fired a bullet at it, that might do the trick. Otherwise, you need a huge input of energy to get silicon to catch on fire as it’s a pretty stable element. And if it was already happening on a large scale, you know the media would be absolutely all over it—the media loves to hate Tesla and loves to hate Elon Musk. That certainly would draw attention if it were happening; what's more likely is that fake news is spreading rumors that are not true. That's been a constant problem with Tesla from the very beginning.

Q: Would you open the occidental spread here today?

A: I would, but I would use strike prices $5 lower. I'd be doing the February $50-$55 vertical bull call spread to give yourself some extra protection, given that the general market itself is so high.

Q: Should I be shorting Apple (APPL) here?

A: No, but the smart thing to do is to sell the $160 calls because I don’t think we’ll get up to $160. You could take any extra premium income, and if you don’t get hit this month, keep doing it every month until you are hit, and then you can take in quite a lot of premium income by the time we get to new highs in Apple, possibly as much as $10 or $15. So, that would be a smart thing to do with Apple.

Q: What's your favorite in biotech and big pharma?

A: Eli Lilly (LLY), which just doesn't seem to let anybody in.

Q: If China were to shut down again, would it hurt the stock market?

A: Yes, but not much. The much bigger falls would be in Chinese stocks (which have already doubled since October) not ours.

Q: Thoughts on biotech?

A: Biotech is the new safety trade that will continue. Also, they’re having their secular ramp-up in technology and new drugs so that is also a good long-term bull call on biotech.

Q: What’s the dip in iShares 20+ Year Treasury Bond ETF (TLT)?

A: $4 points at a minimum, $5 is a nice one, $6 would be fantastic if you can get it.

Q: Could we get a trade-up in oil (USO)?

A: Yes, maybe $5 or $10 a barrel. But it’s just that, a trade. Long term, oil still goes to zero. Short term, China recovery gives a move up in oil and that's why we went long (OXY).

Q: You talk about California NatGas being dead, but California gets 51% of its electricity from natural gas, up from 48% in 2018.

A: Yes, but that counts all of the natural gas that gets brought in from other states. In fact, if you look at the longer-term trend over the last 20 years, coal has gone to zero, nuclear is going to zero, hydro has remained the same at about 10%. NatGas has been falling and green sources like wind and solar, have been rising quite substantially. And now, approximately 25% of all the homes in California get solar energy, or 8.4 million homes, and it is now illegal to put gas piping into any new construction. New York is doing the same. That means it will be illegal to do new natural gas installations in a third of the country. So, I think that points to lower natural gas consumption, and in fact, the 22-year target is to take it to zero, which might be optimistic but you never know. All they need is a smallish improvement in solar technology, and that 100% from green sources is doable by 2045, not only for California but for everybody. All energy plays are a trade only, not an investment.

Q: Any thoughts on the implications for the US and Germany providing tanks to Ukraine?

A: You can throw Poland in there, which is also contributing a tank division—so a total of 58 M1 Abrams tanks are going to Ukraine. By the way, I did command a Marine Corps tank battalion for two weeks on my reserve duty, so I know them really well inside and out. They are powered by a turbine engine, have a suspension as soft as a Cadillac, a laser targeting system accurate to three miles even for beginners, and fire recycled uranium shells that can cut through anything like a knife through butter. The answer is the war gets prolonged, and eventually forces Russia into a retreat or a negotiation. Even though the M1 is an ancient 47-year-old design, its track record against the Russian T72 is pretty lopsided. In the first Gulf War, the US destroyed 5,000 T72s and the US lost one M1 tank because he parked on a horizon, which you should never do with a tank. And every driver of a T72 knows that track record. So that explains why Russian tanks have been running out of gas, sugaring their gas tanks, sabotaging their diesel engines, and doing everything they can to avoid combat because of massive fatal design flaws in the T72. We only need to provide about 50 or 60 of the M1 tanks as a symbolic gesture to basically scare the entire Russian tank force away.

Q: Why do you think Elon kept selling Tesla? Did he think it would go lower?

A: Elon thinks the stock’s going to $10,000, but he needed up-front cash to build out six remaining Tesla factories, and for that, he needed about $40 billion, which is why he sold $40 billion worth of stocks last year when it was peaking. He also is sensitive to selling at tops; it’s better to sell stock in with Tesla at an all-time high than at an all-time low, so he clearly times the market to meet his own cash flows.

Q: What about military contractors?

A: I know Raytheon (RTX) and Lockheed Martin (LMT) have a two-year backlog in orders for javelin missiles and stingers, which are now 47-year-old technology that has to be redesigned from scratch. The US just placed an order for a 600% increase in artillery shells for the 155 mm howitzer. I thought we’d never use these again, which is why US stocks for ammunition got so low. But it looks like we have more or less a long term or even permanent customer in Ukraine for everything we can produce, in old Vietnam-era style technologies. How about that? I’m telling the military to give them everything we’ve got because everything we’ve got is obsolete.

Q: When should we buy Microsoft (MSFT)?

A: On the next 10% dip. It’s the quality stock in the US.

Q: Do you place an order to close the spread at profit as soon as you have filled in the trade?

A: You can do that, but it’s kind of a waste of time. Wait until we get close to the strikes; most of the big companies we deal in, you don't get overnight 10% or 20% moves, although it does happen occasionally.

Q: Natural Gas (UNG) prices are collapsing.

A: Correct, because the winter energy crisis in Europe never showed and spring is just around the corner.

Q: On the Tesla (TSLA) LEAPS, what about the January 2025 $600-$610 vertical bull call spread

A: That is way too far out of the money now. I would write that off and go back into it but do something like a January 2025 $180-$190. It has a much higher probability of going in the money, and still an extremely high return. It would be something like 500% if you get in down at these levels.

Q: How do you see Bitcoin short term/long term?

A: I think the loss of confidence in the asset has been so damaging that it may not come back in my lifetime. It could be another Tokyo situation where it takes 30 years to recover, or only recovers when the entire sector gets taken over by the big banks. So, I don’t see any merit in the crypto trade, probably forever. Once you lose confidence in the financial markets, it’s impossible to get it back. And it turns out that every one of these mainline trading platforms was stealing from the customers. No one ever comes back from that in the financial markets.

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 12 years are there in all their glory.

Good Luck and Stay Healthy,

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

At 29 Palms in my M1 Abrams Tank in 2000