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Tag Archive for: (TSLA)

Mad Hedge Fund Trader

How Neuralink Will Change the World

Tech Letter

Founder of Tesla Elon Musk tweeted a few days ago that it would be a “good idea” to bring his four businesses — Tesla, SpaceX, Neuralink, and The Boring Company — under a giant holding company.

Doing this would encourage more talented engineers to work for Musk and allow the four companies to combine human-resources and marketing departments.

Most of you know three of the four, so let me explain to you about Neuralink.

In short, Neuralink Corporation is an American neurotechnology company developing implantable brain-machine interfaces.

You would think this is straight out of science fiction, but mark my words that in our lifetime, we could all be operating digital devices from our heads if Musk gets his way.

Scary as it does seem now, this will probably be the first of many artificial intelligence procedures to infuse humans with more artificial intelligence.

Musk believes humans will go the way of robot hybrid in the future because the natural development of competition is trending in that way and sadly, this direction in humanity is ultimately existential.

Improvements in technology will periodically be announced, but we are nowhere close to the actual implementation of these neuro devices into a human brain let alone the consumer and economic implications to this technology.

As for today and now, we are in the early innings and testing it out on pigs.

Better them and not me.

Neuralink’s dramatically simplified design for an implant that hopes to create brain-to-machine interfaces is a big deal and partly because of the star power backing the project, which can literally move mountains.

The previous design consisted of a bean-shaped device that would sit behind the ear, but now it is the size of a large coin, and it goes in your skull.

I expect the final iteration to be a millimeter wide.

The in-brain device could enable humans with neurological conditions to control technology, such as phones or computers, with mere thoughts.

The other use case is solving neurological disorders from memory, hearing loss, and blindness to paralysis, depression, and brain damage.

The current prototype – referred to as version 0.9 – measures at 23 millimeters by eight millimeters, and has 1024 electrode "threads" attached to it that are implanted into the brain.

It is designed to replace a coin-sized portion of the skull and sit flush so it would be physically unnoticeable. It would be inductively charged the same way you would wirelessly charge a smartwatch or a phone.

The surgical robot, which is programmed to insert the neural threads safely into the brain, was done by US design company Woke Studios.

Woke Studio’s robot would be able to insert the link in under an hour without general anesthesia, with the patient able to leave the hospital right away.

The robot will eventually do the entire surgery – so everything from incision, removing the skull, inserting electrodes, placing the device, and then closing things up.

It will be completely automated.

Test pigs are being used to test the device which offers important insights into the process of inserting a chip into a brain.

The implant sends real-time signals from the pig’s brain whenever it touches something with its snout.

Described as "healthy and happy", one of the pigs was given an implant two months ago, while another pig has dual Neuralink implants, demonstrating that it is possible to have multiple chips in your head at one time.

A third pig has no implant. According to Musk, each of the animals are "indistinguishable" from each other.

Musk also showed a pig that previously had a chip inserted into its brain, but had since been removed, to show that the procedure is reversible without any serious side-effects.

Neuralink’s Breakthrough Device designation by FDA supports Musk’s neuroscience objectives. The startup is now preparing for its first human test case, pending required approvals, and further safety testing.

If and when and if this technology is green-lighted by the U.S. Federal Government, I envision a free for all into this technology from the likes of Facebook, Google, Apple, and Microsoft, and so on.

If you think “tracking” is bad now, then once tech firms are granted access to consumer’s brains, it could open up a pandora's box of moral conflicts of interest as well as an avalanche of revenue opportunities.

Will American society really get to the point where Facebook is selling your “thoughts” to neural advertisers?

It’s scary to think about but that is the direction we are headed down.

If you view this through the lens of big tech, battering down the hatches to get access to consumer’s “thoughts” is the holy grail of access points and revenue flow.

In 2021, humans still need to digest thoughts and carry out functions through fingers into a phone interface.

Getting rid of all that “fluff” and extracting data and behavioral results from the original source are worth multiple trillions of dollars.

Not only will physical devices be useless at that point, it will spawn a mega cloud storage business that is hooked straight to the mind.

An economic analyst can digest how cloud companies like Amazon and Google would rake in the trillions by storing libraries of data that a mind can tap in at any time.

It really is a gigantic step to the computerization of humans - big tech is first in line to reap the profits and literally control our brains.

Welcome to the future – a future where we coexist with artificial intelligence.

 

neuralink

https://www.madhedgefundtrader.com/wp-content/uploads/2020/12/neuralink-architecture.png 492 832 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-30 13:02:192021-01-02 20:51:43How Neuralink Will Change the World
Mad Hedge Fund Trader

December 15, 2020

Diary, Newsletter, Summary

Global Market Comments
December 15, 2020
Fiat Lux

FEATURED TRADE:

(A NOTE ON OPTIONS CALLED AWAY),
(TSLA), (TLT), (BABA), (JPM), (CAT)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-15 09:04:092020-12-15 09:57:15December 15, 2020
Mad Hedge Fund Trader

December 14, 2020

Diary, Newsletter, Summary

Global Market Comments
December 14, 2020
Fiat Lux

FEATURED TRADE:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or THE GREAT ASSET SHORTAGE),
(INDU), (PFE), (MRNA), (PTON), (DOCU), (ETSY),
(CAT), (JPM), (BABA), (TSLA), (TLT), (ABNB), (DIS)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-14 09:04:542020-12-14 09:39:35December 14, 2020
Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or The Great Asset Shortage

Diary, Newsletter, Summary

Markets are wonderful arbiters of the laws of supply and demand.

When there is a shortage of a particular security, Wall Street has a magical ability to manufacture more by running the printing presses to meet supply, or in the modern incarnation, open the spreadsheets.

Except for this time.

The amount of new cash created by global quantitative easing and the prolific saving habits of locked up Americans are creating more demand than even this efficient highly process can accommodate.

Which means that prices can only go up.

How long and how far is anyone’s guess. My target for the Dow Average is 120,000 in ten years, but even I don’t expect that to take place in a straight line. So, we are all sitting on our hands waiting for the next pullback to buy into, which may….or may not ever happen.

A lot of Dotcom Bubble memories are rising up from the dead. Analysts in 1999 made outlandish forecasts of stocks rising 50% in a year, which then took place in four days. That happened to Tesla (TSLA) last month and Airbnb (ABNB) last week.

In the meantime, the smartest traders, call them the oldest traders, are taking profits on the best years of their careers.

Of course, the short-term direction of the market will be determined by the January 5 Georgia Senate election, where the polls are in a dead heat. The last time this happened, during the presidential election, the Democrats won by a microscopic 15,000 vote margin.

If history repeats itself, the Biden administration will get an extra $6 trillion to play with to restore the shattered US economy. Think $2 trillion for infrastructure spending in all 50 states, $2 trillion for the rescue of bankrupt states and municipalities, $1 trillion for alternative energy and EV subsidies, and another $1 trillion in odds and ends. Needless to say, much of this will end up in the stock market.

I am getting a lot of questions these days regarding what will end this once-in-a-generation runaway bull market. The pandemic created this bull market by accelerating technology, business evolution, and corporate profitability by ten years. I bet a year ago, you weren’t spending your day on Zoom meetings, as I was.

The great irony is that the Pfizer (PFE) and Moderna (MRNA) vaccines may not only kill Covid-19 but the bull market as well. That’s because money will then come out of stocks and go back to the real economy.

That makes pandemic darlings like Peloton (PTON), DocuSign (DOCU), and Etsy (ETSY) especially risky. But then 6% growing GDPs were never what stock market crashes were made of, so any declines will be modest.

As for my own positions, I have a rare 100% long portfolio, mostly Tesla, but also the (TLT), (CAT), (JPM), and (BABA), 80% of which expires with the option expiration on Friday, December 18.

After that, I’ll take it easy with 10% short (TLT) and 10% long (TSLA) and wait for the market, or Georgians to tell me what to do.

A flood of money is to hit the stock market, says hedge fund legend Ray Dalio. The US is facing a perfect storm in favor of all risk assets. There is no reason why price earnings multiples for American stocks can’t reach 50X, double the current 25X. Buy what the central banks are buying. The funny thing is that I agree with Ray on everything. Buy risk on dips.

Stocks will keep soaring into 2021, says JP Morgan strategist Marko Kolanovik. The more risk the better. The Fed will keep interest rates low for at least another year, and ultra-low rates will force big institutions out of bonds and into stocks. Volatility (VIX) will decline. It all sounds like a great long stock/short bond trade to me. Hmmmmm.


Tesla
completed a $5 Billion share issue, after a move to $650, up $142 from my November Mad Hedge BUY recommendation. The stock seems hell-bent on testing the Goldman Sachs $780 price recommendation before the December 18 S&P 500 entry. Elon Musk’s creation is now worth a staggering $608 billion. It’s the best recommendation in the 13-year history of the Mad Hedge Fund Trader.

San Francisco rents dive 35%, as tech workers flee to the suburbs. A lot of remote work is now permanent. Studio apartments are now a mere $2,100, and a one-bedroom can be had for $2,716. For a two-bedroom if you have to ask, you don’t need to know. Shocking!

Sales of million-dollar homes are soaring, as ultra-low interest rates persist and people spend much more time at home. So, bigger for your pod is better. Mortgages over $766,000 are up 57% YOY.

Jamie Diamond says he wouldn’t touch bonds with a ten-foot pole, and nor would I. A 91-basis point yield just doesn’t do it for the chairman of JP Morgan Chase (JPM), one of my recurring longs. Stocks are a much better choice, even if there is a bubble in progress. Keep selling every rally in fixed income, especially the (TLT).

Weekly Jobless Claims
soar to 853,000, up a massive 153,000 from the previous week. To see this happen during the Christmas hiring season is heartbreaking. With 200,000 a day falling to Covid-19, I’m surprised it's not higher, which means it will be. This is what peaks look like. Washington has totally given up.

An $800 billion payday for the bay area. That is the amount of wealth created by just two companies, Tesla (TSLA) and Airbnb (ABNB), since March. And the great majority of shareholders live in the San Francisco Bay Area, including its venture capital and pension funds. No wonder home prices in the suburbs are up 20% YOY. The great irony is that (ABNB) received a massive government bailout only in March. I hope they repay the loans early.

Is Cuba the next big play? A Biden détente could lead to the emerging market investment opportunity of the decade with the $43 million Herzfeld Caribbean Basin Fund (CUBA). It just had its best month in 11 years (like many of us). With Fidel Castro long dead, what’s the point in continuing a 60-year-old cold war. A big market for American products and services beckons, not to mention the tourism and cruise opportunities. But can Biden afford to lose the Florida Cuban vote in the next election?

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

My Global Trading Dispatch catapulted to another new all-time high. December is up 8.55%, taking my 2020 year-to-date up to a new high of 64.99%.

That brings my eleven-year total return to 420.90% or more than double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.26%. My trailing one-year return exploded to 66.30%, the highest in the 13-year history of the Mad Hedge Fund Trader.

The coming week will be a slow one on the data front. We also need to keep an eye on the number of US Coronavirus cases at 16 million and deaths 300,000, which you can find here.

When the market starts to focus on this, we may have a problem.

On Monday, December 14 at 12:00 PM EST, US Consumer Inflation Expectations for November are released.

On Tuesday, December 15 at 11:00 AM, the New York Empire State Manufacturing Index for December are published.

On Wednesday, December 16 at 8:00 AM, US Retail Sales for November are printed.

On Thursday, December 17 at 8:30 AM, the Weekly Jobless Claims are published. We also get November Housing Starts.

On Friday, December 18, at 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, I was stunned to learn that 84 million people are watching The Mandalorian, the latest Star Wars installment Disney (DIS) launched in its hugely successful streaming service a year ago.

It reminds me of when I first saw Star Wars in 1977. I was changing planes in Vancouver, Canada on the way to Tokyo and used a long layover to take a taxi to the nearest theater to catch a film I’d heard so much about.

I was amazed when I realized that the guy sitting in the next seat had memorized the entire script and was mouthing all the words. The only other time I have ever seen this happen was sitting on the benches at Shakespeare’s Globe Theater in London. At least then, they were reciting Romeo and Juliet.

Stay healthy.

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

 

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2020/12/11yr-dec14.png 456 864 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-14 09:02:542020-12-14 09:38:13The Market Outlook for the Week Ahead, or The Great Asset Shortage
Mad Hedge Fund Trader

December 7, 2020

Diary, Newsletter, Summary

Global Market Comments
December 7, 2020
Fiat Lux

FEATURED TRADE:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or A DICEY LANDING)
(SPY), (TLT), (AMZN), (TSLA), (CRM), (JPM), (CAT), (BABA),
(FCX), (GLD), (SLV), (UUP), (FXE), (FXA), (FXB), (FXY), (FXI), (EWZ), (THD), (EPU)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-07 09:04:432020-12-07 09:03:57December 7, 2020
Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or a Dicey Landing

Diary, Free Research, Newsletter

Landing my 1932 de Havilland Tiger Moth biplane can be dicey.

For a start, it has no brakes. That means I can only land on grass fields and hope my tail skid catches before I run out of landing strip. If it doesn’t, the plane will hit the end, nose over, and dump a fractured gas tank on top of me. Bathing in 30 gallons of 100 octane gasoline with sparks flying is definitely NOT a good long term health plan.

The stock market is starting to remind me of landing that Tiger Moth. On Friday, all four main stock indexes closed at all-time highs for the first time since pre-pandemic January. A record $115 billion poured into equity mutual funds in November. This has all been the result of multiple expansion, not newfound earnings.

Yet, stocks seem hell-bent on closing out 2020 at the highs.

And there is a major factor that the market is completely ignoring. What if the Democrats win the Senate in Georgia?

If so, Biden will have the weaponry to go bold. The economy goes from zero stimulus to maybe $6 trillion raining down upon it over the next six months. That will go crazy, possibly picking up another 10%, or 3,000 Dow points on top of the post-election 4,000 points we have seen so far.

That is definitely NOT in the market.

The other big decade-long trend that is only just starting is the weak US dollar. Lower interest rates for longer were reaffirmed by the appointment of my former economics professor Janet Yellen as Treasury Secretary.

A feeble dollar brings us a fading bond market, as half the buyers are foreigners. A sickened greenback also provides the launching pad for all non-dollar assets to take off like a rocket, including commodities (FCX), precious metals (GLD), (SLV), Bitcoin, and the currencies (UUP), (FXE), (FXA), (FXB), (FXY), and emerging stock markets like China (FXI), Brazil (EWZ), Thailand (THD), and Peru (EPU).

All of this is happening in the face of a US economy that is clearly falling apart. Weekly jobless claims for November came in at 245,000, compared to a robust 638,000 in October, taking the headline unemployment rate down to 6.9%. The real U6 unemployment rate stands at an eye-popping 12.0%, or 20 million.

Some 10.7 million remain jobless, 900,000 higher than in February. Transportation and Warehousing were up 140,000, Professional & Business Services by 60,000, and Health Care 46,000. Retail was down 35,000 as stores shut down at a record pace.

OPEC cuts a deal, adding 500,000 barrels a day to the global supply. The hopes are that a synchronized global recovery can take additional supply. Texas tea finally busts through a month's long $44 cap, the highest since March. Avoid energy. I’d rather buy more Tesla, the anti-energy.

Black Friday was a disaster, with in-store shopping down 52%. Long lines and 25% capacity restrictions kept the crowds at bay. If you don’t have an online presence, you’re dead. In the meantime, online spending surged by 26%.

Amazon (AMZN) hires 437,000 in 2020, probably the greatest hiring binge since WWII, and is continuing at the incredible rate of 3,000 a week.  That takes its global workforce to 1.2 million. Most are $12 an hour warehouse and delivery positions. The company has been far and away the biggest beneficiary of the pandemic as the world rushed to online commerce.

Tesla’s (TSLA) full self-driving software may be out in two weeks, instead of the earlier indicated two years. The current version only works on freeways. The full street to street version could be worth $8,000 a car in upgrades. Another reason to go gaga over Tesla stock.

Goldman Sachs raised Tesla target to $780, the Musk increased market share to a growing market. No threat from General Motors yet, just talk. Volkswagen is on the distant horizon. In the meantime, Tesla super bear Jim Chanos announced he is finally cutting back his position. He finally came to the stunning conclusion that Tesla is not being valued as a car company. Go figure. Short interest in Tesla has plunged from a peak of 35% in March to 6% today. It’s learning the hard way.

The U.S. manufacturing sector pauses, activity in the U.S. manufacturing sector barely ticked up in November as production and new orders cratered, data from a survey compiled by the Institute for Supply Management showed on Tuesday. The ISM Manufacturing Report on Business PMI for November stood at 57.5, slipping from 59.3 in October.

Salesforce (CRM) overpays for workplace app Slack, knocking its stock down 9%. This is worth a buy the dip trade in the short-term and this is still a great tech company which is why the Mad Hedge Tech Letter sent out a tech alert on Salesforce on the dip.

Weekly Jobless Claims dive, with Americans applying for unemployment benefits falling last week to 712,000 down from 787,000 the week before. The weakness is unsurprising as we head into seasonal Christmas hiring.

The end of the tunnel for Boeing (BA) as they bring to an end an awful 2020. Irish-based airline Ryanair Holdings placed a large order for a set of brand new Boeing 737 MAX aircraft, giving the plane maker a shot in the arm as the single-aisle jet comes off an unprecedented 20-month grounding.

Ryanair, Europe’s low-cost carrier, has 135 Boeing 737 MAX jets on order and options to bring the total to 200 or more. Hopefully, they won’t crash this time around. My fingers are crossed.

Dollar Hits 2-1/2 Year Low. With global economies recovering, the next big-money move will be out of the greenback and into the Euro (FXE), the Aussie (FXA), the Looney (FXC), the Japanese yen (FXY), the British pound (FXB), and Bitcoin. Keeping interest rates lower for longer will accelerate the downtrend.


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

My Global Trading Dispatch catapulted to another new all-time high. December is up 5.34%, taking my 2020 year-to-date up to a new high of 61.78%.

That brings my eleven-year total return to 417.69% or double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.00%. My trailing one-year return exploded to 64.56%. I’m running out of superlatives, so there!

I managed to catch the 50%, two-week Tesla melt-up with a 5X long position, which is always nice for performance.

The coming week will be a slow one on the data front. We also need to keep an eye on the number of US Coronavirus cases at 14.5 million and deaths at 285,000, which you can find here.

When the market starts to focus on this, we may have a problem.

On Monday, December 7 at 4:00 PM EST, US Consumer Credit is out.

On Tuesday, December 8 at 11:00 AM, the NFIB Business Optimism Index is published.

On Wednesday, December 9 at 8:00 AM, MBA Mortgage Applications for the previous week are released.

On Thursday, December 10 at 8:30 AM, the Weekly Jobless Claims are published. At 9:30 AM, US Core Inflation is printed.

On Friday, November 11, at 9:30 AM EST, the  US Producer Price Index is announced. At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, at least there is one positive outcome from the pandemic. Boy Scout Christmas tree sales are absolutely through the roof! We took delivery of 1,300 trees from Oregon for our annual fundraiser expected to sell them in two weeks. We cleared out our entire inventory in a mere six days!

We sold trees as fast as we could load them. With the scouts tying the knots, only one fell onto the freeway on the way home. An “all hands on deck” call has gone out to shift the inventory.

It turns out that tree sales are booming nationally. The $2 billion a year market places 21 million trees annually at an average price of $8 and are important fundraisers for many non-profit organizations. It seems that people just want something to feel good about this year.

Governor Gavin Newsome’s order to go into a one-month lockdown Sunday night inspired the greatest sales effort I have ever seen, and I worked on a Morgan Stanley sales desk! We shifted the last tree hours before the deadline, which was full of mud with broken branches and had clearly been run over by a truck at a well-deserved 50% discount.

I can’t wait until next year!

Stay healthy.

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

 

 

 

 

 

 

 

 

 

 

https://www.madhedgefundtrader.com/wp-content/uploads/2020/12/john-thomas-chainsaw-e1607348125295.png 500 328 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-07 09:02:522020-12-07 09:18:03The Market Outlook for the Week Ahead, or a Dicey Landing
Mad Hedge Fund Trader

December 2, 2020

Diary, Newsletter, Summary

Global Market Comments
December 2, 2020
Fiat Lux

FEATURED TRADE:

(WHAT HAPPENED TO THE DOW?)
($INDU), (EK), (S), (BS), (CVX), (DD), (MMM),
 (FBHS), (MGDDY), (FL), (GE), (TSLA), (GM)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-02 10:04:242020-12-02 10:11:55December 2, 2020
Mad Hedge Fund Trader

What Happened to the Dow?

Diary, Newsletter, Research

When I joined Morgan Stanley some 35 years ago, one of the grizzled old veterans took me aside and gave me a piece of sage advice.

“Never buy a Dow stock”, he said. “They are a guarantee of failure.”

That was quite a bold statement, given that at the time the closely watched index of 30 stocks included such high-flying darlings as Eastman Kodak (EK), Sears Roebuck & Company (S), and Bethlehem Steel (BS). It turned out to be excellent advice.

Only ten of the Dow stocks of 1983 are still in the index (see tables below), and almost all of the survivors changed names. Standard Oil of California became Chevron (CVX), E.I du Pont de Nemours & Company became DowDuPont, Inc. (DD), and Minnesota Mining & Manufacturing became 3M (MMM).

Almost all of the rest went out of business, like Union Carbide Corporation (the Bhopal disaster) and Johns-Manville (asbestos products) or were taken over. A small fragment of the old E.W. Woolworth is known as Foot Locker (FL) today.

Charles Dow created his namesake average on May 26, 1896, consisting of 12 names. Almost all were gigantic trusts and monopolies that were broken up only a few years later by the Sherman Antitrust Act.

In many ways, the index has evolved to reflect the maturing of the US economy, from an 18th century British agricultural colony, to the manufacturing powerhouse of the 20th century, to the technology and services-driven economy of today.

Of the original Dow stocks, only one, US Leather, vanished without a trace. It was the victim of the leap from horses to automobile transportation and the internal combustion engine. United States Rubber is now part of France’s Michelin Group (MGDDY).

American Tobacco reinvented itself as Fortune Brands (FBHS) to ditch the unpopular “tobacco” word. National Lead moved into paints with the Dutch Boy brand. It sold off that division when the prospects for leaded paints dimmed in 1970 (they cause mental illness in children).

What was the longest-lived of the original 1896 Dow stocks? General Electric (GE), originally founded by light bulb inventor Thomas Edison. It went down in flames thanks to poor management and was delisted in 2018. It was a 122-year run. Today, it is one of the great turnaround challenges facing American Industry.

Which company is the American Leather of today? My bet is that it’s General Motors (GM), which is greatly lagging behind Tesla (TSLA) in the development of electric cars (99% market share versus 1%). With a product development cycle of five years, it simply lacks the DNA to compete in the technology age.

What will be the largest Dow stock in a decade? Regular readers of the Mad Hedge Fund Trader already know the answer.

 

 

Sears: Not the Path to Wealth and Riches

 

Me Not Buying Dow Stocks in 1983

https://www.madhedgefundtrader.com/wp-content/uploads/2016/12/john-tokyo.jpg 425 318 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2020-12-02 10:02:562020-12-02 10:11:12What Happened to the Dow?
Mad Hedge Fund Trader

November 30, 2020

Diary, Newsletter, Summary

Global Market Comments
November 30, 2020
Fiat Lux

FEATURED TRADE:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or SANTA COMES EARLY),
(SPY), (TLT), (TSLA), (JPM), (CAT), (BABA)

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Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or Santa Comes Early

Diary, Newsletter

Everyone has been expecting a Santa Claus rally this year, but it looks like the jolly old man arrived early.

The holiday-shortened month was the best for stocks in 37 years. If you owned Tesla, like we did, it was even better. Elon Musk’s miracle creation shot up an incredible 60% this month.

At $600 a share, the company’s market capitalization expanded by an eye-popping $363 billion to $580 billion, the fastest wealth creation in history. The gain alone would rank it as the 55th largest company in the S&P 500. Similarly, Elon himself earned $100 billion this year, or $17 million an hour, the speediest wealth accumulation since capitalism begin.

These are numbers for the ages.

It’s all proof that if you live long enough, you see everything. OK, all of you who thought the Dow would soar by 12,000 points, or 67% in eight months, please raise your hands. Yes, I didn’t think I’d see many.

Which all raises some concerns for me. But then I’m always concerned. That’s why I’m still alive. That’s why I still have two nickels to rub together. My Mad Hedge Market Timing Index shouting “EXTREME SELL” urges further caution.

Rising at this meteoric pace, the market is pulling forward a big chunk of gains from 2021. Make hay while the sun shines because we may suffer long periods of boredom next year, when the Volatility Index (VIX) drops down to $10 and stays there.  

It all reminds me of the Plaza Accord in 1987, when Japan agreed to a doubling of the yen against the US dollar in exchange for continued access to the US car market.

We all knew this would eventually demolish the Japanese stock market, but not for a while. I remember at the time, an old Japanese folk expression became popular. “The fool may be dancing, but the greater fool is watching.” The Nikkei Average doubled in three years before it crashed. Portfolio managers who only watched were left to pull rickshaws for a living. (This was before Uber).

This is why I have been urging followers to realize their biggest profits, as in Tesla, so they have dry powder with which to buy the next inevitable dip. And you don’t want to be left pulling a rickshaw.

The US Treasury delivered a hit for stocks, as outgoing Secretary Mnuchin cancels all remaining stimulus programs, sucking $459 billion out of the economy. It has so far prompted a $740-point dive in the Dow Average and a $7 rally in the TLT. It’s the ultimate scorched earth strategy that will prolong the recession. Use this move to buy more stocks (SPY) and sell short more bonds (TLT).

Janet Yellen was appointed the new Treasury Secretary in the incoming Biden administration. My old Berkeley economic professor wins again. She is probably the most qualified secretary ever appointed and as academic and former Fed governor. It looks like I may serve as an informal consultant on financial and monetary affairs like I did last time. I drove by her house last week and the vans were already loading up. The markets love her, with the Dow up 500 points and hitting 30,000. Janet is the Queen of Ease and the Master of QE, running a hyper-accommodative policy for five years.

Money is pouring into Asia. First into the pandemic, China was first out. With the most draconian lockdown yet seen, the Middle Kingdom was able to cap total deaths at 4,000. The US is now losing that number of people every two days….with one fourth the population. As a result, China now has the world’s strongest economy, growing at a 6.6% annual rate. The incoming Biden administration will lead to a major improvement in trade relations, bringing us back to a return of globalization. All of this is hugely positive for China.

Tesla tops $580 billion in market cap with a ballistic 37% move since its S&P 500 listing was announced two weeks ago. Look like Elon is due for another $20 billion bonus. Mad Hedge went into this with an aggressive 40% long weighting, making it the best trade of 2020, if not the decade. Tesla is my next trillion-dollar company.

Bitcoin crashed, down nearly $4,000 in 24 hours, or almost 20%. As is always the case with an asset with no fundamentals, nobody knows why as the cryptocurrency tests $16,000, down from $20,000. Fears of increased US regulation may be a factor.

New Home Sales exploded, up 41% YOY to 999,000, and gaining 1.5% in October. It’s the hottest since 2006. Homes sold but still under construction are up 60% YOY. Inventories plunged to 3.5 months and prices are rising due to shortages of labor and materials. This is where inflation begins.

Weekly Jobless Claims leaped to 778,000. The Coronavirus is felling people in the labor force in large numbers. Workers are losing jobs, benefits, and health care just as the pandemic goes exponential.


When we come out the other side of the 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!

 
This has been the best week, month, and year in the 13-year history of the Mad Hedge Fund Trader, and the week was only three and a half days long!

My Global Trading Dispatch catapulted to another new all-time high. November is up 22.06%, taking my 2020 year-to-date up to a new high of 58.09%.

That brings my eleven-year total return to 414.00% or double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 37.63%. My trailing one-year return exploded to 64.91%. I’m running out of superlatives, so there!

I managed to catch the 50%, two-week Tesla melt-up with a rare quadruple long position, which is always nice for performance.

The coming week will be all about jobs. We also need to keep an eye on the number of US Coronavirus cases at 13 million and deaths 270,000, which you can find here.

When the market starts to focus on this, we may have a problem.

On Monday, November 30 at 11:00 AM EST, Pending Home Sales for October are released.

On Tuesday, December 1 at 11:00 AM, The ISM Manufacturing Index for November is out.

On Wednesday, December 2 at 9:15 AM, the ADP Private Employment Report is printed.

On Thursday, December 3 at 9:30 AM, the Weekly Jobless Claims are published.

On Friday, December 4 at 8:30 AM,  the Nonfarm Payroll Report for November is called. At 2:00 PM, we learn the Baker-Hughes Rig Count.

As for me, it’s Christmas tree season for the Boy Scouts again, so I just spent the morning unloading 700 conifers from a semi-truck that just arrived from Corvallis, Oregon. The scouts sell them to raise money for camping trips for the upcoming year. Some of the trees were 12 feet high and two men had to struggle to get them in place.

Last week, I took the scouts to Hendy State Park in northern Mendocino county. We were the only ones camping among the 2,000 year old giant redwoods, but all the RV sites were full. I realized then that tens of thousands are riding out the pandemic and the Great Depression in the California State Park system, rotating locations every two weeks to keep from being kicked out. These are our modern-day “Hooverville’s.”

It’s a sign of the times.

Stay healthy.

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

 

 

 

 

 

 

 

 

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