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The Market Outlook for the Week Ahead, or The Week that Never Was

Of course, WWII historians know well the man who never was, the popular name for Operation Mincemeat.

In 1943, British intelligence found a homeless man who died on the streets of London, dressed him up as a Royal Marine Major William Martin, and released his body from a submarine off the coast of Spain, a German ally.

Handcuffed to his wrist was a briefcase with highly detailed plans for the allied invasion of Greece and the Balkans. The Germans shifted ten divisions to defend the region.

When the allies invaded Sicily instead, it came completely out of the blue. The invading American and British forces found the island almost undefended and inadequately manned and supplied by Italian troops. The allies planned for three months to capture Sicily. Instead, they did it in a mere 38 days. Allied losses came in at a tenth of those expected, thanks to Royal Marine Major William Martin.

The analogy here is that last week, we witnessed the market that never was. Stocks went down, then up. Bonds went up, then down. Even Tesla was virtually unchanged. It all ended up as a big fat zero for traders.

What all of this means for us investors is a subject of heated discussion among strategists. Of course, the Cassandras are always out there arguing that this is all proof that markets are peaking and that the mother of all stock market crashes is just ahead of us.

I take a different tack.

I think we are well into a long-overdue “time” correction whereby stocks go sideways for weeks or months before resuming their heroic assault on new highs. The timing will be dictated by the frantic reversal of the bond market at a ten-year Treasury yield of 2.00%.

Investors will rotate from the newly expensive recovery plays like banks into the newly cheap, such as technology stocks. Notice the sudden recent interest in legacy companies like Oracle (ORCL), Intel (INTC), and Cisco Systems (CSCO), which completely missed the great 2020 tech rally.

All of this sets up perfectly for the barbell portfolio which I have been advocating all year.

If there is a selloff, it will be by things that normal people don’t own. Those include SPACS, anything the Reddit crowd chases, stay-at-home stocks, and very high-priced tech stocks with no earnings.

Much focus has been placed on the Taiwanese-owned Ever Given stuck in the Suez Canal. As a Middle Eastern war correspondent for many years, I spent endless hours debating with my compatriots over what closure of the canal would mean.

What hasn’t been mentioned was that the accident was not caused by a Chinese captain, but Egyptian pilot ships are required to take on to raise revenues, and bribes, for the impoverished country. This all happened in the middle of a sandstorm where visibility is near zero.

I can tell you right now that they won’t get the Ever Given off there until they start to unload containers and lift off some weight so the 200,000-ton ship can rise of its own accord. Good luck with that in the middle of the Sinai Desert. Why not just sell all the contents on Amazon and have them deliver it for free as part of their prime membership?

This is a debacle that will last weeks, if not months, and will cost $9 billion a day in international trade until it’s over. In the meantime, commercial shippers have asked for protection from pirates from the US Navy as they navigate the unfamiliar water around the tip of Africa.

The Mad Hedge Summit Videos are Up, from the March 9,10, and 11 confab. Listen to 27 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here, click on CURRENT SUMMIT REPLAYS in the upper right-hand corner, and then choose the speaker of your choice.

Weekly Jobless Claims dive by 100,000, to 684,000, a one-year low. The decline was led by Illinois and Ohio. Labor shortages are popping up around the country in skilled areas, but bars and restaurants are still lagging severely.

Huge Office Cuts are coming, with execs planning a permanent 20% cut. Better to give the money to shareholders. Downtowns across the country will change beyond all recognition. How do you turn an office into an apartment?

CP Rail buys Kansas City Southern, for $25 billion, further concentrating the north American rail industry. It’s a steal because an economy entering a decade-long boom moves lots of stuff. It’s also a great North/South international trade play, which is recovering strongly with the exit of our last president. I used to ride box cars on the old Canadian Pacific back in the sixties (you can’t hitch hike where there are no cars), and occasionally the engineers would let me drive. It suddenly makes Norfolk South (NSC) and Union Pacific (UNP) look very tempting.

Another Tesla $3,000 Target was issued by Ark’s Cathie Wood, an early investor. Cathie’s Ark Innovation Fund ETF was up 180% last year largely on the strength of a massive Tesla (TSLA) holding. Her bear case is a low of $1,500 by 2025, nearly triple the current price. She has only one more triple to go to get to my own $10,000 forecast.

Biden has $3 Trillion More to Spend on top of the just passed $1.9 trillion rescue package. It's all rocket fuel for the stock market, not so much for bonds. The money will be spent on a mix of old-line freeway and bridge repair along with new spending on decarbonizing the power grid and social measures. It will be financed by tax hikes on those earning over $400,000. Remember, Roosevelt hiked the maximum tax rate to 90% on the wealthy, where it stayed for 30 years, and Biden is old enough to remember.

Daily Air Travelers top 1.5 Million, for the first time in a year. The pandemic low was 200,000 a day. It’s an indication of how anxious Americans have become to travel, and how strong the imminent economic boom will be.

Intel to build two chip fabs for $20 billion in Arizona to address the current severe shortage. US construction is a positive as it helps reduce reliance on foreign supplies. Too bad it will still leave them five years behind (AMD), but it’s a major move in the right direction. It deals with everything investors wanted to hear and moves them solidly into the 10nm architecture market. Buy (INTC) on dips.

New Home Sales Dive, off 18.2% in February, now that the free money train has left the station. Weather was blamed as a factor, with giant snowstorms slamming much of the country. Shortage of supply is another big issue. Some big builders are basically out of inventory and are reduced to selling floor plans with extended completion dates.

US Dollar (UUP) hits a four-month high, with a major assist from rising US bond interest rates. Expect the rally to continue until ten-year yields hit 2.00%, then sell the daylights out of it. With the US money supply growing at a near exponential 30% annual rate, there’s no way the dollar strength can continue. When you increase the supply, you decrease the value, simple supply and demand. My first pick is to buy the Aussie (FXA) a call option on a global synchronized economic recovery.

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000, here we come!

It’s amazing how well patience can help your performance. My Mad Hedge Global Trading Dispatch profit reached a super-hot 18.61% so far in March on the heels of a spectacular 13.28% profit in February.

It was a go-nowhere week in the market, so I limited myself to a single trade all week, a double short in the bond market (TLT) on top of a welcome $5 rally. The position turned immediately profitable.

I still have a deep in-the-money call spread Tesla (TSLA) that is profitable and expires in 14 trading days. That leaves me with 70% cash and a barrel full of dry powder.

This is my fifth double-digit month in a row. My 2021 year-to-date performance soared to 42.10%. The Dow Average is up 9.9% so far in 2021.

That brings my 11-year total return to 464.65%, some 2.08 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 41.30%.

My trailing one-year return exploded to positively eye-popping 119.39%. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Corona virus cases at 30.2 million and deaths topping 550,000, which you can find here.

Thankfully, death rates have slowed dramatically, but Obituaries are still the largest sector in the newspaper. At this point, some 47% of the US population has achieved immunity through vaccination or catching the disease. Herd immunity is near.

The coming week is a big one for jobs data.

On Monday, March 29, at 9:00 AM, the Dallas Fed Manufacturing Index for March is released.

On Tuesday, March 30, at 9:00 AM, the S&P Case Shiller National Home Price Index for January is published.

On Wednesday, March 31 at 8:15 AM, the ADP Challenger Private Employment Report for March is out. Pending Home Sales for February are indicated at 9:00 AM.

On Thursday, April 1 at 8:30 AM, the Weekly Jobless Claims are published.

On Friday, April 2 at 8:30 AM we get the Nonfarm Payroll Report for March. At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, tax time is coming up and let me tell you, I have absolutely the best IRS story of all time.

It comes from my late, dear friend, Al Pinder, who I sat next to for ten years at the Foreign Correspondents of Japan in Tokyo, pounding away on antiquated Royal typewriters until our shoulders were as stiff as boards. Al then was the shipping correspondent for the New York Journal of Commerce newspaper.

Al was a colorful character, to say the least.

In the run up to WWII, Al took an extended vacation in Japan where he toured and photographed the country’s beaches, looking for the best landing sites for the US military in case war broke out.

To sneak the top-secret pictures out of the country, he bought a large steamer trunk and placed them a false bottom. Then he went to Tokyo’s red-light district in Yoshiwara, bought a dubious sex toy, an inflatable life-sized Japanese doll, and placed it on top.

When the trunk was searched, the customs officials found the doll, had a good laugh and passed him on. Al’s photos were the basis of Operation Olympic, the 1945 US invasion of Japan, made unnecessary by the dropping of the atomic bomb.

When the war broke out, Pinder parachuted into western China, where he acted as the liaison with Mao Zedong’s guerilla forces in Hunan province. In 1944, Al received a coded message from headquarters ordering him to intercept a top-secret airdrop from a DC3 in the middle of the night.

Knowing he would be mercilessly tortured by the Japanese if caught, he set up three signal fires in a triangle in a remote part of the desert and managed to find the parachute. Dodging enemy patrols all the way, he returned to his hideout in a mountain cave and opened the package.

In it was a letter from the IRS asking why he had not filed a tax return for the past three years.

I told this story at Al’s wake a few years ago and everyone had a good laugh. Al went on to run CIA operations in Japan during the fifties and sixties. When he passed away, there was a frantic search for a safe deposit box by American intelligence officials containing records of all CIA payoffs to Japan’s leading conservative party.

When the box was finally found, there was an enormous sigh of relief at the embassy. I still miss Al.

Stay healthy.

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

March 22, 2021

Diary, Newsletter, Summary

Global Market Comments
March 22, 2021
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or ENTERING TERRA INCOGNITA),
(TLT), (TSLA), (JPM), (VIX), (QQQ), (IWM), (BAC), (C), (SPY)

The Market Outlook for the Week Ahead, or Entering Terra Incognita

Diary, Newsletter

During the Middle Ages, when explorers sought new lands and their rich treasures, large sections of their navigational charts were marked with the term “terra incognita.”

That meant what lays beyond was unknown and that they should enter only at their own risk. Often there was a picture of a dragon or a sea monster to mark the spot.

There was also often a warning that you might even sail off of the edge of the earth.

Financial markets have entered a “terra incognita” of their own recently.

Here is the big unknown: How high can ten-year US Treasury bond yields soar when the Federal Reserve is promising to keep overnight interest pegged at 25 basis points until 2024 in the face of essentially unlimited monetary and fiscal stimulus?

So far, the answer is: more.

That is a really big question because we’ve never really been here before.

In fact, some Cassandras from the right are even predicting such a policy will cause us to sail off of the edge of the earth. The modern-day equivalent of running into dragons is inviting runaway inflation.

I can tell you from my own vast, almost immeasurable navigational experience (I am licensed by the US government) that “terra incognita” does not invite inordinate risk-taking or betting of ranches by traders or investors. Instead, they tend to sit on their hands, work on their golf swing, or update their Facebook pages.

That is what the Volatility Index (VIX) last week is essentially screaming at us by touching the $19 handle for the first time in a year.

Almost everyone I know has made more money in the markets than at any time in their lives. That is what a near doubling of the stock market in a year gets you.

And the new wealth was not attained because their intelligence and market insight have suddenly doubled, although a strong case for such can be made for readers of Mad Hedge Fund Trader.

So I used the Friday, March 19 option expiration to go into a rare 100% cash position. I really have gotten away with too much lately.

Then feeling guilty, I slapped on a single long in Tesla (TSLA), that old reliable money-maker. It’s worked for me since it was $3.50 a share. After all, a gigantic green energy infrastructure bill is about to pass in Congress. What better to own than the world’s largest EV car maker.

And what a tear it has been.

After bringing in a ballistic 66.64% profit in 2020, I reeled in another 40.38% gain in the first 2 ½ months of 2021. I did this via 40 trades which generated 38 wins and only two losses. That’s a success rate of an incredible 95%. I have to pinch myself when I read these numbers.

I am concerned because numbers any higher than this will look fake. It’s a rule of thumb in the investment business that when managers claim a 100% success rate, they are either high-frequency traders back by super-fast mainframe computers or running a scam.

So, I have been advising clients to pare back their biggest positions that became massively overweight purely through capital appreciation. Financials come to mind. JP Morgan (JPM) up 81% in three months? Sounds like a Ponzi Scheme.

So let me give you some upside targets in the bond market. We doubled bottomed in 2012 and 2016 at a 1.37% yield in the ten-year Treasury bond yield. We have already surpassed that level like a hot knife through butter.

At the depths of the 2008-2009 Great Recession, rates bottomed at 2.0% yield, which now seems within easy reach. The lowest yield we saw after the 2003 Dotcom Crash was a 3.0%.

When the upside targets in interest rates in this cycle are the lows of the previous economic cycles, that augurs pretty well for the future of stock prices. That is the guaranteed outcome of the tidal wave of cash now sweeping the global financial system.

The permabears are warning that the “Roaring Twenties” have already happened. I argued that they are only just getting started and that the indexes have another 4X of upside in them over the rest of the decade. When the last “Roaring Twenties” occurred, you didn’t sell in 1921.

It also reminds me of the huge “rip your face off” rally we saw from March 2009 to 2010. A lot of market gurus said then that was the peak. They were wrong. Today, they are driving for Uber and Lyft.

So when a talking head warns you that higher interest rates will cause the stock market to crash, just turn off the boob tube and go back to practicing your golf swing.

The Mad Hedge Summit Videos are Up, from the March 9,10, and 11 confab. Listen to 27 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by clicking here at www.madhedge.com, click on CURRENT SUMMIT REPLAYS in the upper right-hand corner, and then choose the speaker of your choice.

Ten Year Bond Yields (TLT) soar to a 1.75%, setting financials on fire and demolishing tech (QQQ). We are rapidly approaching a 2.00% yield, which could trigger a huge round of profit-taking on bond shorts, a domestic stock selloff, and a tech rally. The next great rotation may be just ahead of us.

Oil (USO) dives 8% on fears of an imminent Saudi production increase and a worsening Covid-19 outlook in Europe. Are we next with all these early reopening’s? Gone 100% cash at the close with the March quadruple witching option expiration.

A Tax Hike is next on the menu. Corporate tax rates are returning from 21% to 28% for the small proportion of companies that actually PAY tax. Raising taxes on earnings of more than $400,000. Pass through entities to get a haircut. Increasing estate taxes. You better die soon if you want your kids to stay rich. Increase in capital gains taxes over $1 million. I want my SALT deduction back! The grand negotiation begins on who needs bridges, rail lines, and subway extensions. Hint: for some reason, there have been no new federal projects started in California for the past four years and all the existing ones were cut back.

Value Stocks (IWM) are beating growth ones, reversing a decade-long trend. The Russell Value Index is up 11% this year, while growth is unchanged. It’s a total flip from last year when growth was tech-led. This could continue for years, or until the tech becomes the new value stocks. Big winners include Boeing (BA), JP Morgan (JPM), and Morgan Stanley (MS), all Mad Hedge moneymakers.

Bitcoin tops 61,000. Nothing else to say but that because there are no fundamentals. It’s up 80% in 2021 and 540% YOY. But it is becoming a good risk-taking indicator thought, and right now it is shouting a loud and clear “Risk On.”

It’s going to be All About Stock Picking for the Rest of 2021, says Morgan Stanley strategist Mike Wilson. Dragging on the index from here on will be the prospects of rising rates, tax hikes, and inflation. Mike especially dislikes small caps (IWM) which have already had a terrific run, with a 19% YTD gain. Stock picking? Boy, did you come to the right place!

Fed to hold off on rates hikes through 2023, said Governor Jay Powell after the open Market Committee Meeting. Bonds rallied a full half-point on the news and then crashed again, taking yields to a new 1.70% high. It sees inflation reaching a positively stratospheric 2.0% sometime this year, after which it will die, so nothing to do here. This is what a 100% dovish FOMC gets you. Let the games begin!

New Housing Starts Collapse, from an expected +2.5% to -10.3%, as high lumber, land, labor, and interest rates take their toll. This will only drive new home prices high at a faster rate and the little remaining supply dries up. Millennials need some place to live.

When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!

It’s amazing how well patience can help your performance. My Mad Hedge Global Trading Dispatch profit reached a super-hot 16.89% during the first half of March on the heels of a spectacular 13.28% profit in February.

It was a tough week in the market, so I held fire and ran my seven remaining profitable positions into the March 19 options expiration. I took advantage of a meltdown in Tesla (TSLA) shares to put on my only new position of the week with a very deep-in-the-money long. That leaves me with 90% cash and a barrel full of dry powder.

This is my fifth double-digit month in a row. My 2021 year-to-date performance soared to 40.38%. The Dow Average is up a miniscule 7.7% so far in 2021.

That brings my 11-year total return to 462.93%, some 2.12 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an unbelievable 41.14%.

My trailing one-year return exploded to 121.60%, the highest in the 13-year history of the Mad Hedge Fund Trader. I truly have to pinch myself when I see numbers like this. I bet many of you are making the biggest money of your long lives.

We need to keep an eye on the number of US Coronavirus cases at 29.8 million and deaths topping 542,000, which you can find here. Thankfully, death rates have slowed dramatically, but Obituaries are still the largest sector in the newspaper.

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

On Monday, March 22, at 9:00 AM, Existing Home Sales for February are released.

On Tuesday, March 23, at 9:00 AM, New Home Sales are published.

On Wednesday, March 24 at 8:30 AM, we learn US Durable Goods for February are printed.

On Thursday, March 25 at 8:30 AM, Weekly Jobless Claims are out. We also get the final read of US Q4 GDP.

On Friday, March 26 at 8:30 AM, US Personal Income & Spending for February are released. At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, I have been doing a lot of high altitude winter mountain climbing lately, and with the warm spring weather, the risk of avalanches is ever present. It takes me back to the American Bicentennial Everest Expedition, which I joined in 1976.

It was led by my old friend, instructor, and climbing mentor Jim Whitaker, who pulled an ice ax out of my nose on Mt. Rainer in 1967 (you can still see the scar). Jim was the first American to summit the world’s highest mountain. I tried to break a high-speed fall and an ice ax kicked back and hit me square in the face. If I hadn’t been wearing goggles I would have been blinded.

I made it up to 22,000 feet on Everest, to Base Camp II without oxygen because there were only a limited number of canisters reserved for those planning to summit. At that altitude, you take two steps, and then break to catch your breath.

There is a surreal thing about that trip that I remember. One day, a block of ice the size of a skyscraper shifted on the Khumbu Ice Fall and out of the bottom popped a body. It was a man who went missing on the 1962 American expedition. Everyone recognized him as he hadn’t aged a day in 15 years, since he was frozen solid.

I boiled my drinking water, but at that altitude, water can’t get hot enough to purify it. So I walked 100 miles back to Katmandu with amoebic dysentery. By the time I got there, I’d lost 50 pounds, taking my weight to 120 pounds.

Jim was an Eagle Scout, the first full-time employee of Recreational Equipment Inc. (REI), and last climbed Everest when he was 61. Today, he is 92 and lives in Seattle, WA.

Jim reaffirms my belief that daily mountain climbing is a great life extension strategy, if not an aphrodisiac.

Stay healthy.

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

March 19, 2021

Diary, Newsletter, Summary

Global Market Comments
March 19, 2021
Fiat Lux

Featured Trade:

(MARCH 17 BIWEEKLY STRATEGY WEBINAR Q&A),
(JPM), (TLT), (TBT), (SQ), (MMM), (SIL), (QQQ), (WMP), (CCIV), (TSLA), (USO), (CRSP), (PLTR), (HYG), (FCX), (XME)

March 17 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the March 17 Mad Hedge Fund Trader Global Strategy Webinar broadcast from frozen Incline Village, NV.

Q: I’ve heard that the COVID-19 cases are being understated by 16 million. Do you think this is true?

A: Yeah, I've always argued that the previous government's numbers were vastly underestimating the true number of cases out there for political purposes, but we are on the downslide regardless, so that’s good.

Q: When are tech stocks going to bottom out and when can I buy them?

A: I knew I would get this question. This is the question of the day. Picking bottoms is always tough because these are momentum plays and not valuation plays. I’ll give you a couple of levels though. The tech (QQQ) multiple is now at 25X earnings and the S&P 500 (SPY) is at 22X, so your first bottom will be down about 10% from here, or a 22X multiple. And I don’t think we will get much lower than that because tech stocks are growing at 20-25% a year, versus the (SPY) growing at maybe 10%, and I don’t think tech goes to much of a discount in that situation. So, you’re just waiting for interest rates to top out and start to go down, which will be the other indicator of a tech bottom. We had a slowdown in the rise of rates for just a couple of days this week, and tech stocks took off like a rocket. Those are your two big signals.

Q: With the Fed announcement, are you still in the Invesco QQQ Trust NASDAQ ETF (QQQ) bear put spread?

A: Yes, one of them expires in two days so that’s a piece of cake. The other one expires in a month, but it is way out-of-the-money—the April $240-$245 bear put spread, so I’ll keep that for a real meltdown day. But if it looks like we’re getting a breakout, I will come out of that short position so fast it will make your head spin.

Q: Do you like Palantir (PLTR)?

A: Absolutely yes—screaming LEAP candidate. It traded all the way down to $20 two weeks ago and is trading around $25 now. It’s a huge data firm, lots of CIA and defense work, huge government contracts extending out for years, cutting edge technology, and run by a nut job, so yes screaming buy at this level.

Q: Freeport McMoRan (FCX) is taking some pain here, is this still a buy and hold?

A: Yes, it’s taking the pain along with all the other domestic stocks, which is natural. In their case though, it’s up almost 10x from its bottom a year ago where we recommended it, so yeah I'd say time for a rest. So I’m still a buyer of the metals and (FCX) on dips, but like all other metals, it did get overextended. EV manufacturing is doubling this year, which uses a ton of copper. The same is true with solar panels and Chinese industrial recovery. When all your major markets are doubling in size, it’s usually good for the stock. I peaked at $50 in the last cycle and could touch $100 in this one.

Q: What are your thoughts about the Lucid EV SPAC, Churchill Capital IV (CCIV)?

A: Don’t touch it with a ten-foot pole. They only have 1 or 2 concept vehicles for high-end investors to test drive. The rumor is that their main factory will be in Saudi Arabia where the bulk of the seed capital came from. They’ll never catch up with Tesla (TSLA) on the technology. There's always going to be a few niche $250,000 cars out there, and they have no proof they can actually make these things. When they get to a million vehicles a year, then I might be interested. But they haven't done the hard part yet, which is mass-producing battery packs for a million cars. They've only done the easy part which is designing one sexy prototype to raise money. So, stay away from Lucid, I don’t think they’re going to make it.

Q: What about oil?

A: I am avoiding oil plays like the plague.

Q: When do you anticipate your luncheons to be back?

A: Maybe in 2023. I don’t want to scare off my customers by inviting them to a lunch where they all get COVID-19. If I did have a lunch, I’d have a vaccine requirement and a temperature gun to hit them at the door like everywhere else. I really miss meeting subscribers in person.

Q: Should I buy banks like JP Morgan (JPM) at this level?

A: I would say no. That ship has sailed. Wait for a steeper selloff or just let it run. We’ve already had an enormous move and you don’t want to chase it with a low discipline trade, which is what that would be.

Q: What do you think of silver (SLV)?

A: It’s a buy long term, short term it’s in the grim spiral of death along with the other precious metals, which absolutely hate rising interest rates. A silver long here is the equivalent of a bond (TLT) long. When you do go into silver, buy Wheaton Precious Metals (WPM) for the leveraged long play.

Q: Is 3M (MMM) going to extend the upside?

A: Probably yes, that's a classic American industrial play and a great company. I have friends who work there. How could we live without Post-it notes, Scotch Tape, and Covid-19 N-95 masks?

Q: What about Square (SQ)?

A: I love it in the long term, buy on the dips and buy it through LEAPS (long term equity anticipation securities).

Q: Should I unwind my leveraged financial ETF?

A: I’d say take a piece off, yeah; you never get fired for taking a profit. And they have had a tremendous move. Plus of course, the flip side of taking profits on domestic recovery stocks is to buy tech with that money. And eventually, that's what the entire market will do, it just may still be a little bit early.

Q: What’s a good target for LEAPS for CRISPR (CRSP) and Palantir (PLTR)?

A: Put your first strike 30% higher than today’s stock price and go 2 years out in maturity. I noticed on some names, the June 2023’s are starting to trade, but they’re highly illiquid. But if you put a bid in there and you get a market meltdown, you will get hit.

Q: If the long-term future for oil (USO) is so bad, why is it $65?

A: A few reasons. #1, huge short covering action. #2, economy recovery faster than people expected because of the stimulus. #3, a lot of people, mostly in Texas, Oklahoma, and Louisiana, don’t believe that there will be an all-electric grid in 20 years and think that oil will be in demand forever, including the entire oil industry, so they’re in there buying. And #4, the Saudis have held back with production increases to push the price up, so they’re letting it run so they can sell at a higher price. When they do sell, oil crashes again.

Q: Can we re-watch this presentation?

A: Yes, we post it about 2 hours later on the website so all our people in about 135 countries can access it whenever they like. 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.

Q: How often do you have these webinars?

A: Every two weeks, and if you need help accessing it on your account page, email customer support at support@madhedgefundtrader.com.

Q: Is it time to initiate short positions on oil companies?

A: Not yet but keep it in the back of your mind. When some of the super-hot economic data come out after Q2, that may be your short in oil—then we may get into the $70’s a barrel. But not yet, there’s still too much upward momentum.

Q: Do you think we will see the 30-year fix below a 3.00% yield again?

A: Yes, in the next recession, which may be 5 or 10 years off because we’re starting at such a low base.

Q: Regarding copper, EV motors require a ton of copper. Doesn’t that make the metals a BUY?

A: That is true, and why we recommended Freeport McMoRan at $4 a year ago and recommended buying every dip. Each one of these rotor motors on each wheel of a Tesla weighs about 100 lbs—I’ve lifted them. Remember I tore apart a Tesla once just to see what made it tick, and they’re really heavy, and they use a lot of copper, and silver as well. So that has always been the bull market case for copper, as well as the fact that China re-emerged as a major buyer for their industrial buildout. That’s why we had a long in the SPDR S&P Metals and Mining ETF (XME).

Q: Do you foresee a good opportunity to go heavy into margin again?

A: Maybe if we get a decent selloff this summer, but you’ll never get the opportunity we had a year ago when you really wanted to put 100% of your portfolio into 2-year LEAPS. The people who did that made many tens of millions of dollars, which is why I get a free bottle of Bourbon every month. That was a once in 20 years event.

Q: What is your 2021 target for the S&P 500 (SPX)?

A: $4,860. It’s in my strategy letter which I sent out on January 6th, and that is all still posted on the website, click here for it.

Q: How do I renew my subscription with your company, and how do I figure out what I bought?

A: Email customer support at support@madhedgefundtrader.com and they will answer you immediately.

Q: Do you follow the iShares IBoxx High Yield Corporate Bond ETF (HYG)?

A: Yes, that is the high yield junk bond fund, but I have been avoiding long bond plays, as you may have noticed with my screaming short of the past year. We list (HYG) in these slides in the Bonds section.

To watch a replay of this webinar, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER (as the case may be), 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

March 11, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 11, 2021
Fiat Lux

FEATURED TRADE:

(THE TESLA STOCK OF GENETIC TESTING)
(NVTA), (CRSP), (TDOC), (RHHBY), (ILMN), (ABT), (DGX), (ROKU), (SQ), (SHOP), (TSLA)

The Tesla Stock of Genetic Testing

Biotech Letter

Invitae (NVTA) is one of the biggest, albeit erratic, movers in 2020, but only a handful of investors know about the stock.

In March 2020, the stock was trading at $7.43 per share only to shoot to a whopping $61 by mid-December.

A year since then, Invitae stock sits somewhere at $40—a price that could go right up again in the months to come.

Despite the volatility, Invitae continues to generate excitement among its investors.

In fact, Invitae, which has $7.6 billion in market capitalization, is grouped in with bigger healthcare and biotechnology companies like CRISPR Therapeutics (CRSP), valued at $9.36 billion, and Teladoc Health (TDOC), valued at $28.7 billion.

Its potential is even said to match the likes of up-and-coming tech stocks such as Roku (ROKU), Square (SQ), and Shopify (SHOP), which have market capitalizations of $45.7 billion, $103.07 billion, and $134.6 billion, respectively.

Given its growth in the past months and its impressive 226.8% three-year revenue increase, the projections for Invitae look well-grounded.

In fact, I think it’s reasonable to say that Invitae could be the Tesla (TSLA) of the genetic testing industry.

The genetic testing market is estimated to be worth over $21 billion by 2027, growing at a compound annual growth rate of 10% until then.

In 2020, Invitae reported a 29% year-over-year increase in revenue at $279.6 million.

The company also saw a rise in its testing volume by roughly 41% to reach 659,000 billable units—this, despite the headwinds brought about by the COVID-19 pandemic, when the demand for genetic tests took a back seat to make way for COVID-19 diagnostic and other related medical concerns.

Although some of the tests offered by Invitae are covered by insurance carriers, those that are not covered can be availed for as low as $99 for services like noninvasive prenatal screening and $250 for diagnostic, carrier, or proactive testing.

To put things in perspective, people nowadays are more than willing to shell out at least $100 to discover their ancestry, which in most cases is something they already have an idea about.

So, why would these people be reluctant to spend a bit more than $100 to check if they have to take particular precautions to keep themselves safe from diabetes or heart disease?

In the future, Invitae is well-positioned to offer high-quality genetic tests at more affordable prices as well as cater to higher volumes.

One of the most notable moves by Invitae so far is buying ArcherDX for $1.4 billion in cash and stock in October 2020.

This is a telling move for Invitae in terms of its plans for the future.

ArcherDX is another genetic testing company, which specializes in oncology.\

Specifically, ArcherDX focuses on personalized cancer monitoring as well as liquid and tissue biopsy analysis.

Simply put, ArcherDX specializes in developing tests that determine the most suitable drugs to use for cancer treatments.

To date, there’s already a growing number of competition in the genetic testing market, making Invitae’s acquisition of ArcherDX is a smart move.

Most of them are bigger companies like Roche (RHHBY) with a market cap of $269.57 billion, Illumina (ILMN) with $58.28 billion, Abbott (ABT) with $205.28 billion, and Quest Diagnostics (DGX) $15.6 billion.

Invitae, which only has a market capitalization of $7.6 billion, is considered as one of the minor players.

With the addition of ArcherDX in its portfolio, Invitae’s growth could be fast-tracked as the combined companies could ramp up sales on top of queuing additional genetic tests in their current lineup.

Invitae’s shares have jumped by almost 100% in 2020 but saw an over 25% fall last month. Although it has yet to turn a profit since its creation in 2013, Invitae remains an attractive investment thanks to its top-line growth.

Digging into their numbers, Invitae has actually managed to cut down on its cash burn by roughly $20 million from the first quarter of 2020 through the last quarter, excluding the ArcherDX deal.

That’s a notable improvement for a company and indicative of its capacity to veer towards the right direction.

Invitae has a very strong cash position at the moment, with a massive equity offering just last January. Right now, the company’s stockpile is nearly $800 million, which could carry them for quite some time.

Looking at its path of profitability, the company is also projected to be on track for a 50% to 60% growth in the next few years.

For 2021, Invitae is looking at over $450 million in annual revenue, which is 61% higher than 2020.

At this point, Invitae offers an attractive purchasing opportunity for those who want to get in on the industry before it explodes.

invitae

March 9, 2021

Biotech Letter

Mad Hedge Biotech & Healthcare Letter
March 9, 2021
Fiat Lux

FEATURED TRADE:

(AN MRNA STOCK TO CONSIDER)
(BNTX), (MRNA), (PFE), (NVS), (SNY), (AZN), (JNJ), (NVAX), (MRK), (BMY), (REGN), (DNA), (CVAC), (FB), (TSLA), (GOOG)

March 8, 2021

Tech Letter

Mad Hedge Technology Letter
March 8, 2021
Fiat Lux

Featured Trade:

(A SPECULATIVE EV NAME TO CONSIDER)
(FSR), (TSLA), (NIO)

A Speculative EV Name to Consider

Tech Letter

The 700% gain by Tesla (TSLA) in the past 365 days has meant that this is a Tesla world and everyone else is living in it.

Not to mention they produce a magnificent car that everyone wishes they could drive.

Just look at the unusual options activity of last Friday, and the top 10 most voluminous call activity was in TSLA and Chinese electric vehicle (EV) maker NIO.

Heavy call option buying signals that derivative traders believe the underlying stock will go up in the short-term.

EVs have leaped ahead of the cloud as a derivate of the cloud that contains ultra-growth price growth in the underlying stocks.

Fortunes are being made on speculative EV bets as we speak.

The success has spawned lookalikes, charlatans, and copycat imposters that hope to mimic the same type of trajectory and business.

Infinite attempts will be made to make a crack at the Tesla narrative and to join them as the number two or three in a group of one.

One speculative bet that has a distant shot of making headway in the short to medium term is EV manufacturer Fisker (FSR).

Fisker recently made ingenious inroads to Apple’s subcontracting partner, EV Taiwanese manufacturing specialist Foxconn Technology Group.

They agreed to develop a smartphone maker Foxconn’s hoping the manufacturer’s efforts will boost its automotive capabilities at a time when technology companies including its main customer, Apple Inc., are looking to expand in vehicles.

It’s not coincidental that Foxconn’s first try to sort out the teething pains coalesces around an unknown brand like Fisker.

If plans to fortify their skills in this relatively new industry go awry, they’ll just write this one off.

The know-how and knowledge developed on the ground could also reroute Fisker’s prospects and attach it to the back of Apple’s potential 5G car.

A three-way partnership with each entity providing expertise would certainly mean a 10-fold increase in Fisker’s underlying stock or provide the ammo needed to claim itself as number 2 to Tesla.

Of course, the road is windy and long and there is no certainty that Fisker will knock the socks out of this agreement, but the parameters have been initially set for them to do well in the short-term.

The car will be built by Foxconn, targeted at multiple markets including North America, Europe, China, and India, and sold under the Fisker brand.

Production is set to start in the fourth quarter of 2023.

There is outsized risk in producing this car because Foxconn specializes in making smartphones and not cars.

They are new to the auto business and relying on collaboration and innovative manufacturing that will either go well or unravel quickly.

Fisker founder Henrik Fisker has criticized the car industry for being outdated and said, “We still talk about adopting the Toyota manufacturing system,” referring to a production and logistics concept that was developed decades ago.

Fisker plans to design and market the vehicle while Foxconn will supply the skateboard chassis and manage supply chain and assembly.

Provided they can use their smartphone know-how and flip it into car-making mode, however, in reality, it’s a tall order for the Taiwanese giant.

“Outside the box” solutions are needed to compete with Tesla and taking a speculative bet on Fisker also means believing this Foxconn partnership will work.

Shares of Fisker rose 39% on the announcement showing there is a cohort believing the risk is worth a bet because the upside is savory.

Foxconn will build more than 250,000 vehicles annually for the Fisker partnership and Founder Fisker hatched the plan when he was reading about Apple’s plans for a car. He said he began sketching what he thought a tech company would build if one went into the car business.

“It will be like nothing you’ve seen before,” Fisker said.

With still much development yet to come, Apple will take 5-7 years to launch their car and that’s if they can get their act together while caring for their main iPhone business.

Certainly, many things need to align for Fisker to score a long-term contract designing Apple smart cars, but at least they can claim to be in the same universe as Apple, even if it is a distant planet.