(TSLA) Archives

April 6 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the April 6 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.

Q: The iShares Biotechnology ETF (IBB) is down quite a bit—do I wait a bit longer to put on a debit call spread LEAPS for the end of this year and possibly the end of 2024?

A: This is really one of the two most interesting parts of the market right now. The biotech stocks have been absolutely destroyed over the past year—down 70, 80, 90% in some cases; and at that level, the worst-case scenario is in the price. Maybe we bounce along the bottom for another year. In the best case, these things all double or triple or even go up 10 times. We’re very close to putting on a 2024 call spread in the best biotech names, and if you get the Mad Hedge Biotech Letter (Click here for the link), you already know what they are because the downside risk on these things is getting close to nil, and the upside is 10 times. I like that kind of math—when the upside versus the downside is 10 to 1 in your favor. When I see specific LEAPS opportunities, I’ll send them out to you, but the answer is: not yet. We’re getting very close on biotech, however.

Q: I sold about a third of my ProShares UltraShort 20+ Year Treasury (TBT) position at $22.00 for a nice 40% gain, thank you very much. Should I hold the rest for a while? And is there a significant upside for 2022?

A: I’ve been telling everyone: hold those shorts. I know those of you who put on the December $150-$155 vertical bear put spread or the December $145-$150 vertical bear put spread already have substantial profits, but the time value on these options is still large, so there is still quite a lot of these profits to be made hanging on to all of your put spreads in the ProShares UltraShort 20+ Year Treasury Bond ETF (TLT). And is there a substantial downside from here? I think yes! If the Fed goes to a half-point rate hike schedule for the next 4 meetings, the (TLT) is absolutely going down to a $105 or $110 level or so. So, keep those shorts and add to shorts on rallies. We came close. I said sell on a $6 point rally and we got a $5 point rally. I didn't pull the trigger, and of course, now we’re here at new lows.

Q: Are we close to buying LEAPS in tech?

A: Yes, I think that once this current meltdown finishes, I want to go back in there. But I want to go long-dated.

Q: What does rapid unwind of the Fed balance sheet mean for the markets?

A: It’s terrible! The Fed has a balance sheet close to $9 trillion dollars. Before the financial crisis of ‘07, it was $800 million dollars, and in fact, in the last 4 years, it has gone up from $20 trillion to $30 trillion. So these are just bubblicious levels for the Fed to own. And what is QT or quantitative tightening? They sell those bonds. And of course, everyone knows they’re going to sell, so they’re dropping bids for bonds like crazy right now—that's why you’re getting the meltdown in the (TLT). This is bad for the stock market; there’s no world in which the stock market goes up with sharply rising interest rates. The best case is that you give up 20% and then make some of it back, and then give up 20% and then make some of it back. So yeah, expect to hear a lot about QT. We only ended QE or quantitative easing about 3 weeks ago, and it looks like we may go straight into QT as soon as May. And boy, the bond market is sure reflecting that today.

Q: How long will wage inflation last? Can I count on 10% pay increases forever?

A: No, it will last until the next recession. I have a feeling that the unemployment rate will hit all-time lows next month—probably 3.2% or 3.3%. And we’re essentially at a full employment economy right now. What happens next? Recession probably in one or two years. Then those wage hikes disappear completely, and people start getting laid off, and goodbye to inflation of all kinds since 60% or 70% of the inflation calculation is wage cost.

Q: What is a good age to retire?

A: Never. I can’t tell you how many friends I’ve had who retire and die within a year. I had one friend retire and he died the next day. What you could do is keep your old job and cut your hours by half, or you could retire from your old job to go on to a new job that you love, like opening a restaurant or a job built around your lifetime hobby, whatever that is. As long as you stay engaged, you keep Alzheimer’s at bay and you’re an active contributing person to society. As soon as you stop doing that and just start doing something like golf, your days are numbered.

Q: What factors will create a recession in 2022?

A: Well I don't think that's going to happen; that would be like multiple 1% rate rises by the Fed, and the Fed completely panicking like we said, and causing a premature recession. But I do think that by 2024 rates will be so high that we will get a recession, probably a short one, maybe 6 months. A lot also depends on the war and if Europe can replace their Russian gas/oil fast enough or they go into an oil shock and recession there.

Q: Will the Fed destroy the economy in order to save it?

A: Yes, they will, if we get inflation up into the teens, which we saw in the 1980s, they absolutely will raise rates. And then I think the 10-year made it to 12% in the early 80s when Volcker was around, and the overnight rate got to 18%. And I know that because I bought a coop in New York City with a mortgage rate of 18%. I took out one of the first floating rate mortgages and by the time I sold the house, the mortgage rate had dropped down to 11% and the value of the home had doubled.

Q: Google (GOOG), Adobe (ADBE), and Apple (AAPL) spreads are treading water.

A: That is a sign that these are the stocks that will lead the next recovery. So, only 20% down, top to bottom, in Apple while all other stocks were getting hammered for 40% or more means Apple is going to lead any recovery in the market. Watch these big tech stocks carefully—they are the new leaders, they just don’t know it yet.

Q: What will inflation do to the housing market? Should I sell or hold my investment properties?

A: Keep them. Housing is one of the biggest beneficiaries of inflation. Not only do the house prices go up, so does everything that goes into the house, like the copper, steel, lumber, kitchen appliances, etc. You really have the best play on inflation, and I don’t think interest rates will kill the housing market. I think all that will happen is people will move from 30-year fixed to 5-year adjustables, as they have done in previous high interest rate cycles.

Q: Where is the buy territory on the Mad Hedge Market Timing Index?

A: Below 20. It’s almost impossible to lose money when you buy at a market timing index of 20. You may get a day or two visit down into the teens, but if you hang on, that’ll become a big moneymaker for you. That’s been working for me for 50 years—it should work for you too.

Q: Do the chips and transports breaking down worry you about the general market?

A: No, I think they’re discounting a recession that isn’t going to happen. Remember half of all the recessions discounted in the market don’t actually happen, and I think that these are one of those non-recessionary selloffs. But it may take them a couple of months to figure out that this bull market still has a couple of years of life to it and that it’s too early to sell. By the way, once people realize that they discounted the recession too early, what are they going to pour back into the fastest? The semiconductor stocks. That's why I’ve got a laser focus on NVIDIA (NVDA).

Q: If there is no recession coming, are the retailers getting too oversold?

A: Yes, but in the world that’s out there, where you really only want to own two or three of the best sectors and avoid the other 97, retailers are the ones you want to avoid—unless there's some specific single company story that you know about.

Q: Housing prices can’t fall when there's such enormous demand coming from millennials, right?

A: That’s true. In fact, the number of houses that need to be built to meet this demand is anywhere from one to five million, so this is a shortfall that will take at least a decade to address, and house prices don’t fall in that situation. They may appreciate at a slower rate, but they will appreciate, nonetheless.

Q: Is there any level where you would consider a call spread in the TLT?

A: Well, I had the April $127-$130 vertical bull call spread and I had my head handed to me. So somewhere, but clearly not yet—again, it depends a lot on what the Fed does and how fast.

Q: What’s the outlook for the Euro (FXE), (NVDA)?

A: Lower. Until the Ukraine War ends, they get an economic recovery, and they wean themselves off of Russian energy and move over to American energy. And that's at least a year down the road, so I’m not rushing into any European investment—stocks, bonds, or currencies.

Q: Are rising interest rates good for banks?

A: Yes, but right now those benefits are being offset by recession fears which will probably go away in a couple of months. So that kind of makes banks a strong buy right here.

Q: When the Shanghai lockdown ends, will it create another surge in commodity prices?

A: Absolutely, yes. China is the world's largest consumer of commodities, and the restoration of any of their purchasing power will certainly be great for all commodity prices—food, energy, metals, you name it.

Q: Is Tesla (TSLA) a LEAPS candidate?

A: Yes but wait for it to take a run at the $700 low that we saw last month. We probably won’t get there, but $800 this time around is probably a great LEAPS candidate for Tesla going forward. I expect them to meet all of their goals for production this year.

Q: Won’t Bitcoin ($BTCUSD) keep falling if equity markets are lower?

A: Yes, but we don’t have that much lower to go in equity markets—maybe 10%. So just as we’re looking to buy equities and the smaller technology stocks on dips, we're also looking to buy Bitcoin on dips. If we can get back into the $30,000 handle, that might be a ripe buy territory for all the cryptocurrency plays.

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 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

April 7, 2022

Diary, Newsletter, Summary

Global Market Comments
April 7, 2022
Fiat Lux

Featured Trade:

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

April 4, 2022

Tech Letter

Mad Hedge Technology Letter
April 4, 2022
Fiat Lux

Featured Trade:

(HOW TO BE AN ELITE TRADER?)
(TWTR), (TSLA), (SPACEX)

How To Be An Elite Trader?

Tech Letter

How to be an elite stock market trader?

Easy.

First, be the richest guy in the world.

Shell out $3B on a 9.2% stake in a publicly-traded tech stock that you often use.

Grab a bag of popcorn and watch the SEC filing announced and the stock soar 26%.

Make an instant $780M appreciation in your purchase, flip it if you want to right away for a profit, or hold it to most likely make another double or triple in your investment.

It seems like it’s that easy for guys like Tesla (TSLA) founder and CEO Elon Musk who announced a monster purchase in the social media messaging company Twitter (TWTR).

Making money isn’t that easy for most people, but Elon isn’t most people.

He has more gunpowder than anyone else and deploying it at this moment is an unequivocal buy signal for tech in the short term.

He usually is the smartest guy in every room and Twitter has been beaten down quite badly in the short-term going from $77 per share down to $31.

Buy low and sell high.

This formula has worked for many people.

Twitter will instantly go from a tech company rough around the edges to now an Elon Musk company.

The brand difference is immense.

First on the cards will most likely be the changing of CEO Parag Agrawal who must be responsible for the acceleration of digital ads you see on Twitter lately.

Agrawal is not Musk’s chosen man and Musk’s decision to dive into Twitter also has an activist investor element to it.

Let me remind readers that it was only just a few days ago that Elon Musk said he is “giving serious thought” to creating a social media platform that would compete with Twitter, saying that the latter has been stifling free speech.

“Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” Musk tweeted in a Twitter poll.

The next day, Musk took it a step further, writing: “Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?”

In the same thread, a Twitter user asked the Tesla CEO about possibly “building a new social media platform” that would boast “an open-source algorithm.”

The user proposed that the new platform would be one “where free speech and adhering to free speech is given top priority” and where “propaganda is very minimal.”

There will be an inquisition into the “best practices” at Twitter to see who is behind the mechanisms that lead to what Musk believes is the stifling of censorship.

Naturally, it appears that Musk will be hellbent on securing a board seat and this could be the precursor to additional investments into Twitter that might have him secure majority ownership.

Musk will turn Twitter into what he sees is good for democracy and sadly for investors in the short term, which could plausibly be bad for the share price.

However, if this becomes his pet project, he will want it to succeed in the long-term like everything else he touches which turns into gold and failure is not an option.

Just imagine being part of the umbrella that is Twitter management right now, Musk will most likely push for wholesale management changes at every level.

This is also an indictment of how bad Twitter management has been.

Musk is about to remake Twitter in his own image and what does that mean for tech stocks?

In a world of high uncertainties, this offers an ironclad green light to buy tech stocks.

Certainly, Musk wouldn’t buy Twitter at this time because he believes it is at a high point.

I loaded up last Friday in tech and I believe much of the short-term bad news in technology stocks is priced into shares and we have a lull before earnings season in which there is a chance for tech stocks to make up lost ground.

The last nugget I want to throw out to readers is that Twitter could become the vehicle in which Musk develops his passion for cryptocurrency.

This would dovetail nicely with Musk’s tendency to pull workers from Tesla and Space X in order to harness synergies.

March 31, 2022

Diary, Newsletter, Summary

Global Market Comments
March 31, 2022
Fiat Lux

Featured Trade:

(WHY SOLID-STATE BATTERIES ARE THE “NEXT BIG THING”)
(TSLA), (QS)

Why Solid-State Batteries are the “Next Big Thing”

Diary, Newsletter

Tesla shares have recently gotten their mojo back, exploding by an incredible 60% in the past month, and that can only mean one thing: mass production of solid-state batteries is fast approaching.

For the last 30 years, the cutting edge of battery design has been trapped in lithium-ion liquid or gel states. This originally Japanese technology took us from the first generation of smartphones in the early 1990s to the 1,200-pound, 405-mile range behemoths of today.

Now it’s time for the next big thing.

Solid-state batteries, made of oxide, sulfide, and phosphate ceramics, have existed in labs for decades and are currently used in pacemakers and other small devices. But economic mass production has remained elusive.

That may be about to change.

Bill Gates-backed QuantumScape gained a listing on the New York Stock Exchange via a SPAC (special purpose acquisition corporation) with Kensington Capital Acquisition Corp. (click here for the link). The deal valued the company at $3.3 billion, a high figure for a firm with no salable product.

QuantumScape is a decade-old San Jose, CA-based startup which has been pioneering solid-state battery technology. It obtained a $100 million investment from Volkswagen in 2018. QuantumScape’s goal is to supply the batteries for an all-electric VW Golf by 2025.

And here is the big deal about solid state. It offers energy densities 2.5 greater than existing lithium-ion batteries. It also presents far less risk of catching fire when punctured, as we have seen dramatically on TV a few times over the last couple of years with unfortunate Teslas.

With such technology, Tesla can cut battery sizes from 1,200 pounds to 500 pounds, chop $6,000 off the cost of production of each car, and further extend ranges because of less weight.

That would enable Tesla to enter the mass market with a $36,000 entry-level Tesla 3 or small SUV Model Y with minimal fuel cost and maintenance for the life of the car. This is how Tesla boosts production from last year’s 500,000 units to 5 million units annually by 2025. This is what the recent $700 Tesla share price is all about.

There are even more advanced battery technologies on the horizon. Samsung is working on graphene technology for its smartphones. The University of Chicago has developed a lithium dioxide battery seven times more powerful than those currently available. Silicon nanowire technology will become viable in three years that offer a further multiplication of ranges.

In the end, Elon Musk may surprise us all. In 2019, Tesla bought Maywell Technologies and their dry battery technology which can produce batteries at 16 times greater energy density at 20% less cost, giving a 20-fold improvement in battery performance.

That is a greater leap in energy densities than we have seen over the past decade when costs dropped by 80%.

As a long-time Tesla owner (chassis no. 125 of the assembly line), I can tell you that it has been a battle to keep up with Tesla’s rapidly emerging technology. As soon as I bought a Model X three years ago with a 275-mile range, a new 351-mile range was announced. I did get a great deal on the car though and I’ll never drive another vehicle.

As an old venture capitalist once told me, “When you’re in tech, you’re in the bakery business. You have to sell whatever you have in three days before it goes stale.”

For a YouTube video of Bill Gates explaining his involvement in QuantumScape, please click here.

March 28, 2022

Diary, Newsletter, Summary

Global Market Comments
March 28, 2022
Fiat Lux

(SPECIAL WARTIME ISSUE)

Featured Trade:

(TESTIMONIAL),
(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE UNBELIEVABLE MARKET),
(SPY), (TLT), (TBT), (TSLA), (NVDA)

The Market Outlook for the Week Ahead, or The Unbelievable Market

Diary, Newsletter

Listening to the market commentary this week, the word “unbelievable” kept popping up.

It was “unbelievable” that the market crashed by 15% when Russia invaded Ukraine. It was equally “unbelievable” that it then melted up 7% over five trading days.

So has the market gone from discounting the outbreak of WWIII and complete Armageddon to a total victory by Ukraine, the resurgence of NATO, and the end of Russia….in a week?

Well, maybe they have done just that.

The only thing we can count on for sure is that volatility will continue for the indefinite future. The only certainty we have is that change will continue, and it is accelerating at a phenomenal rate.

Of course, it’s all amazing to me. I am a creature of the American 1950s who is now living 70 years in the future. Yes, even the Jetson-type flying cars have happened.

Let me update you on the war, since I know you’re all dying to know.

The Ukraine is winning. What once appeared to be a small, defenseless nation had in fact been preparing for a prolonged guerilla war for seven years, ever since Crimea was invaded.

Javelin and stinger missiles were stockpiled at every key intersection in the country. And the California National Guard has been training the army on how to use them for the last seven years. It was all a gigantic ambush in the making.

The Russian Army, which has seen no real combat experience for 30 years, believed their own propaganda and literally expected to be showered with roses on day one. As a result, they ran out of gasoline, food, and ammunition, and now precision weapons. Some 10% of the army has been killed and maybe 20% of their Air Force shot down. The war is essentially over, so Putin is desperately seeking a way to call it a victory and get out.

Putin himself is toast. At this point, he is the richest man in the world who can’t spend a single ruble of his money. What wealth he had overseas has been seized and will be used to finance the reconstruction of Ukraine. Putin can never leave Russia again without being arrested as a war criminal. But if he stays, he runs the constant risk of assassination. The guy has made a lot of enemies.

What about Putin’s nukes you may ask? Of the headline 7,000 such weapons mentioned in the SALT treaties, only 200 actually work. The rest are corroding empty shells. The math is very simple. Russia’s $1 trillion GDP can’t support any more of these wildly expensive weapons. By the way, China has the same number.

The logic of MAD (Mutually Assured Destruction) still applies, making nuclear weapons useless. If Putin fires off one nuke, his entire country vaporizes in 30 minutes. His generals know this. If ordered to use nukes, they would either ignore the order or depose him immediately.

As someone who has spent the last half-century contemplating the future of the universe, the consequences of this are absolutely mind-boggling.

Economic warfare has finally come into its own as a weapon more destructive than nuclear weapons. In a year, per capita income in Russia will have plunged from last year’s $10,000 to the Soviet-era $1,000. In weeks, Putin has written off 30 years of economic growth. A second Russian Revolution is a sure thing, but what form it will take should be interesting.

How did such a clever man as Putin end up in such a predicament? He surrounded himself with advisors who told him only what he wanted to hear. Such is the way of dictators who have been in power too long. A recent US president had the same problem, with similar results.

The US is the huge winner in all this. Biden announced on Friday that America will replace the missing Russian oil and gas, some 10% of the total world supply. This has already started a renaissance of the US energy industry, which only two years ago was on its heels and destinated to become the next buggy whip industry.

As I have been pointing out to the Joint Chiefs since all this started, strong support for Ukraine not only eliminates Russia as a threat, it puts the shackles on China with its own expansionist desires. You haven’t heard much about Taiwan lately. For America, it’s a twofer.

To say all of this is wildly positive for American stock markets is an understatement. It certainly keeps my $240,000 forecast for the Dow by 2030 on the table. How long it will take investors to figure all this out is anyone’s guess. But I think we are setting up for one hell of a second half.

You see all this in the behavior of a single stock. After NVIDIA (NVDA), the best stock in the world, plunged 40% on fears of deglobalization, it rocketed by 47% in the past week, suggesting that deglobalization is coming back stronger than ever. It reiterates my argument that you use this correction to pick up the Cadillacs at a discount, not Volkswagens.

Bonds Crashed, on comments from Fed governor Jay Powell that if he has to raise interest rates by 50 basis points next month, he will. It’s nothing new but it certainly set the cat among the pigeons with bond longs. The (TLT) broke $130, triggering a round of stop losses before it bounced back. The double short (TBT) popped to $21.33. The good news is that this is more than covered by the seven other bond trades we have closed in 2022 that made money. Those who have bond put LEAPS, which is almost all of you, are making a fortune. It looks like my yearend target of a $2.50% ten-year yield may be hit imminently. Keep selling rallies in the (TLT).

Will the Fed Raise Interest Rates by a Full 1% in April? Our central banks could make such a move at their April 28 confab as they are so far behind the curve, especially if inflation data continues hot. Such a move, or the fear of us, might give us a second shot at a double bottom in stocks at the (SPY) $410 level. Such a move would make your sizeable bond shorts look pretty good.

Recession is Unavoidable Without Russian Oil, says the Dallas Fed. There isn’t enough time to bring alternatives on to the market. The scenario is similar to the invasion of Kuwait in 1991 when we lost 1.5 million barrels a day overnight. This time, it’s 9 million b/d. It all augers for higher oil prices and slower economic growth….unless you drive a Tesla!

Weekly Jobless Claims Lowest Since 1969 at 187,000, down an eye-popping 28,000 on the week. No problems with the economy here. The drop in claims is consistent with a labor market in which employers are desperately trying to hang onto workers and attract new ones.

Berkshire Hathaway Buys Alleghany Insurance for $11.6 billion, taking (BRKB) to yet another new all-time high. Warren Buffet definitely loves the insurance industry, which he uses as a cash cow to fund all his other investments. Alleghany Insurance is in effect a mini-Berkshire, starting out in railroads and evolving into a general investment holding company. Keep buying (BRKB) on dips, a long time Mad Hedge favorite

Tesla Delivers First German Made Model Y, which will enable the company to reach its 1.5 million vehicle target for 2022, up 50%. With an energy crisis in Europe, Tesla will sell these as fast as they can make them. There is currently a one-year wait to get a Model X in the US, and I can sell mine for more than I paid for it three years ago.

Jeffries Raises Tesla Target from $1,250 to $1,400. It cites a dramatically changed geopolitical environment which sent oil prices through the roof, greatly benefiting all makers of electric vehicles, of which Tesla is far and away the largest. The company is firing on all cylinders, which it actually doesn’t make. Maybe in five years, they will get to my own $10,000 target for Tesla. Buy (TSLA) on dips.

Alibaba Announces Monster Share $25 billion Buy Back, taking the shares up 11%. Could this spell the end of the Chinese stock market crash, with many companies down 80%-90%?

New Home Sales Dive, down 2% to 772,000 in February. Inventories are still very light at 6 months compared to a scant 2-month supply for existing homes. Interest rates are starting to bite, and prices are still soaring, taking the median national price to a new high of $406,600, up 10.6% YOY.

The US to Replace Russian Gas for Germany, some two-thirds by year-end and completely by 2027. It is already on track to supply a record 22 billion cubic feet last year and 50 billion cubic feet by 2030. But the US is at maximum capacity and only major investments will increase supply. More specialized LNG carriers will need to be built and Golar LNG (GLNG) and Flex LTD (FLEX) are the plays there. Buy Chenier Energy (LNG), Tellurian Inc. (TELL), and Sempra (SRE) on dips.

Pending Homes Sales Sink, down 4.1% in February, the fourth straight month of declines. The share of disposable income taken by monthly mortgage payments rose by an incredible 8.3% last month, shutting out buyers. It explains why homebuilder stocks like Lennar (LEN) and KB (KBH) are getting slaughtered.

My Ten-Year View

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

With near-record volatility, my March month-to-date performance retreated to a still blistering 12.60%. My 2022 year-to-date performance ended at a chest-beating 27.19%. The Dow Average is down -4.00% so far in 2022. It is the greatest outperformance on an index since Mad Hedge Fund Trader started 14 years ago.

On the next capitulation selloff day, which might come with the April Q1 earnings reports, I’ll be adding more long positions in technology.

That brings my 13-year total return to 539.75%, some 2.10 times the S&P 500 (SPX) over the same period. My average annualized return has ratcheted up to 44.36%, easily the highest in the industry.

We need to keep an eye on the number of US Coronavirus cases at 80 million and rising quickly and deaths topping 976,000 and have only increased by 7,000 in the past week. You can find the data here. Growth of the pandemic has virtually stopped, with new cases down 96% in a month.

On Monday, March 28 at 7:30 AM EST, the Dallas Fed Manufacturing Index is out.

On Tuesday, March 29 at 9:00 AM, The S&P Case Shiller National Home Price Index is published.

On Wednesday, March 30 at 8:15 AM, the ADP Private Employment Data is out.

On Thursday, March 31 at 7:30 AM, the Weekly Jobless Claims are printed.

On Friday, April 1 at 8:30 AM, the March Nonfarm Payroll Report is announced. At 2:00 PM, the Baker Hughes Oil Rig Count is out.

As for me, I received calls from six readers last week saying I remind them of Ernest Hemingway. This, no doubt, was the result of Ken Burns’ excellent documentary about the Nobel prize-winning writer on PBS last week.

It is no accident.

My grandfather drove for the Italian Red Cross on the Alpine front during WWI, where Hemingway got his start, so we had a connection right there.

Since I read Hemingway’s books in my mid-teens, I decided I wanted to be him and became a war correspondent. In those days, you traveled by ship a lot, leaving ample time to finish off his complete works.

I visited his homes in Key West and Ketchum, Idaho. His Cuban residence is high on my list now that Castro is gone.

I used to stay in the Hemingway Suite at the Ritz Hotel on Place Vendome in Paris where he lived during WWII. I had drinks at the Hemingway Bar downstairs where war correspondent Ernest shot a German colonel in the face at point blank range. I still have the ashtrays.

Harry’s Bar in Venice, a Hemingway favorite, was a regular stopping off point for me. I have those ashtrays too.

I even dated his granddaughter from his first wife, Hadley, the movie star Mariel Hemingway, before she got married, and when she was still being pursued by Robert de Niro and Woody Allen. Some genes skip generations and she was a dead ringer for her grandfather. She was the only Playboy centerfold I ever went out with. We still keep in touch.

So, I’ll spend the weekend watching Farewell to Arms….again, after I finish my writing.

Oh, and if you visit the Ritz Hotel today, you’ll find the ashtrays are now glued to the tables.

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

March 25, 2022

Diary, Newsletter, Summary

Global Market Comments
March 25, 2022
Fiat Lux

Featured Trade:

(THE MAD HEDGE TRADERS & INVESTORS SUMMIT VIDEOS ARE UP!)
(MARCH 23 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (TSLA), (BA), (DEER), (CAT),
(AAPL), (SLV), (FCX), (TLT), (TBT)

March 23 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the March 23 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley.

Q: What is the best way to keep your money in cash?

A: That’s quite a complicated answer. If you leave cash in your brokerage account, they will give you nothing. If you move it to your bank account they will, again, give you nothing. But, if you keep the money in your brokerage account and then buy 2-year US Treasury bills, those are yielding 2.2% right now, and will probably be yielding over 3% in two years, so we’re actually being paid for cash for the first time in over ten years. And, as long as it’s in your brokerage account, you can then sell those Treasury bonds when you’re ready to go back into the market and buy your stock, same day, without having to perform any complicated wire transfers, which take a week to clear. Also, if your broker goes bankrupt and you hold Treasury bills, they are required by law to give you the Treasury bills. If you have your cash in a brokerage cash account, you lose all of it or at least the part above the SIPC-insured $250,000 per account. And believe me, I learned that the hard way when Bearings went bankrupt in the 1990s. People who had the Bearings securities lost everything, people who owned Treasury bills got their cashback in weeks.

Q: Is the pain over for growth stocks?

A: Probably yes, for the smaller ones; but they may flatline for a long time until a real earnings story returns for them. As for the banks, I think the pain is over and now it’s a question of just when we can get back in.

Q: Why did you initiate shorts on the Invesco QQQ Trust Series (QQQ) and SPDR S&P 500 ETF Trust (SPY) this week, instead of continuing with the iShares 20 Plus Year Treasury Bond ETF (TLT) shorts?

A: We are down 27 points in 10 weeks on the (TLT); that is the most in history. And every other country in the world is seeing the same thing. That is not shorting territory—you should have been shorting above $150 in the (TLT) when I was falling down on my knees and begging you to do so. Now it’s too late. If we get a 5-point rally, which we could get any time, that’s another story. It is so oversold that a bounce of some sort is inevitable. I’d rather be in cash going into that.

Q: Do you think Tesla (TSLA) has put in a bottom, or do you still see more downside? Is it time to buy?

A: The time to buy is not when it is up 50% in 3 weeks, which it has just done. The time to buy is when I sent out the last trade alert to buy it at $700. This was a complete layup as a long three weeks ago because I knew the German production was coming onstream very shortly; and that opens up a whole new continent, right when energy prices are going through the roof—the best-case scenario for Tesla. And the same is happening in the US—it’s a one-year wait now to get a new Model X in the US. In fact, I can sell my existing model X for the same price I paid for it 3 years ago, if I were happy to wait another year to get a replacement car.

Q: Will the Boeing (BA) crash in China damage the short-term prospects? And as a pilot, what do you think actually happened?

A: Boeing has been beat-up for so long that a mere crash in one of its safest planes isn’t going to do much. It could have been a maintenance issue in China, but the fact that there was no “mayday” call means only two or three possibilities. One is a bomb, which would explain there being no mayday call—the pilots were already dead when it went into freefall. Number two would be a complete structural failure, which is hard to believe because I’ve been flying Boeings my entire life, and these things are made out of steel girders—you can’t break them. And number three is a pilot suicide—there have been a couple of those over the years. The Malaysia flight that disappeared over the south Indian Ocean was almost certainly a pilot suicide, and there was another one in Germany and another in Japan about 20 years ago. So, if they come up with no answer, that's the answer. It’s not a Boeing issue, whatever it is.

Q: Is John Deer (DEER) or Caterpillar (CAT) a better trade right now?

A: It’s kind of six of one, half a dozen of the other. Caterpillar I’ve been following for 50 years, so I’m kind of partial to CAT, and Caterpillar has a much bigger international presence, but that could be a negative these days in a deglobalizing world.

Q: Apple (AAPL) has really caught fire past $170. Should I chase it here or wait until it’s too overbought?

A: I never liked chasing. Even a small dip, like we’re having today, is worth getting into. So always buy on the dips.

Q: Is Silver (SLV) still a good long-term play?

A: Yes, because we do expect EV production to ramp up as fast as they can possibly do it. Too bad the American companies don’t know how to make electric cars—they just haven’t been able to get their volumes up because of production problems that Tesla solved 12 years ago. So, long term, I think it will do better, but right now the risk-on move is definitely negative for the precious metals.

Q: How low will the iShares 20 Plus Year Treasury Bond ETF (TLT) go in April before the next Fed meeting?

A: I think we’re bottoming for the short term right around here. That’s why I had on that $127-$130 call spread in the (TLT) that I got stopped out of. And I may well end up being right, but with these call spreads, once you break your upper strike, the math goes against you dramatically. You go from like a 1-1 risk profile to like a 10-1 against you. So, you have to get out of those things when you break your upper strike, otherwise, you risk writing off the entire position with 100% loss. As long as Jay Powell keeps talking about successive half-point rate cuts, we will get lower lows, and my 2023 target for the TLT is $105, or about $20.00 points below here.

Q: Do you think we retest the bottoms?

A: Absolutely, yes; it just depends on where the test is successful—with a double bottom or with a retrace of half the recent moves. Keep in mind that stocks go up 80% of the time over the last 120 years, and that includes the Great Depression when they hardly went up at all for 10 years, so selling short is a professional’s game, and I wouldn’t attempt it unless you had somebody like me helping you. You're betting against the long-term trend with every short position. That said, if you’re quick you can make decent money. Most of the money we’ve made this year has been in short positions, both in stocks and in bonds.

Q: Where can we find this webinar?

A: The recording for this webinar will be posted on the website in about two hours. Just log into your account and you’ll find them all listed.

Q: When should I sell my tradable ProShares UltraShort 20+ Year Treasury ETF (TBT)?

A: You don’t have an options expiration to worry about, so I would just keep in until we hit $105 in the (TLT). If you do want to trade, I’d take a little bit off here and then try to re-buy it a couple of points lower, maybe 10% lower.

Q: What do you think of a Freeport McMoRan (FCX) $55-$60 vertical bull call spread?

A: The market has had such a massive move, that I’m reluctant to do out of the money call spreads from here unless we get a major dip. So, don’t reach for the marginal trade—that’s where you get your head handed to you.

Q: Will yield curve inversions matter this time and foretell a recession?

A: I think no, because corporate earnings are still growing, and by the summer, we probably will have a yield curve inversion.

Q: There seems to be some huge breakthrough in battery technology where batteries could be recharged within four minutes. I believe it’s the Chinese who have the tech, if so how will that impact on Tesla?

A: Every day of the year someone presents Tesla with a revolutionary new battery technology. It either doesn’t work, can’t be mass-produced, or is wildly uneconomical. So, I’ll confine my bet that Tesla will be able to eventually mass produce solid state batteries and get their 95% cost reduction that way.

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

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