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The Market Outlook for the Week Ahead, or Time to Change Strategy

All good things must come to an end.

Mad Hedge has made fortunes for thousands of followers over the last 15 years with its aggressive options spread strategy, which profits mightily from falling market volatility ($VIX). That is what is happening in the market 95% of the time.

However, it doesn’t make sense when the ($VIX) drops below $20, and that may now continue to be the case for a prolonged period of time.

However, just as one window closes, another opens.

While low volatility makes options spreads no longer attractive, it makes two-year LEAPS the bargain of the century. With volatility this low, you essentially get the second year for free. That is more than adequate time to go into any recession that may or may not happen and then come back out the other side at max profit.

If the underlying stock suddenly rockets, which is often the case with my recommendations, you can collect 90% of the maximum potential profit in a two-year LEAPS within months, if not weeks.

Better yet, while we used to make 15%-20% on front month options spreads, which benefited from accelerated time decay, the profit on two-year LEAPS can run from 100% to 500%. One client bagged a 5,000%, or 50X profit on an NVIDIA (NVDA) LEAPS he strapped on last October.

He doesn’t work anymore.

The timing for this strategy adjustment is perfect. We have just entered a new bull market for stocks that could run for another decade. With the exception of the “Magnificent Seven,” most US stocks are now just above their bear market bottoms. What better time to increase your leverage tenfold.

I won’t be adding LEAPS to my daily position sheet or P&L. They will remain a front-month trading tool. So the millions you are about to make will just have to remain our little secret. Concierge members will get access to a dedicated website that will keep a running total of all Mad Hedge LEAPS issued.

All good strategies must come to an end. Market conditions change or the copycats and wannabees squeeze the life out of them. I have seen too many good traders go out of business clinging to strategies that worked yesterday, but not today. They were hauled away in straight jackets, kicking and screaming because they lost all their money.

The stock market is like working in a hurricane. If you don’t learn how to bend with the wind, you snap and end up in a pile of debris.

When the ($VIX) gets back above $20, or better yet $30, and the Mad Hedge Market Timing Index plunges down to the $20’s, I’ll be back fully loaded with front month options spreads by the dozens.

Good luck.

So far in June, we are up +0.47%. My 2023 year-to-date performance is still at an eye-popping +62.52%. The S&P 500 (SPY) is up only a miniscule +12.63% so far in 2023. My trailing one-year return reached +101.75% versus +24.19% for the S&P 500.

That brings my 15-year total return to +659.71%. My average annualized return has blasted up to +48.86%, another new high, some 2.54 times the S&P 500 over the same period.

Some 42 of my 46 trades this year have been profitable. Only 23 of my last 24 consecutive trade alerts have been profitable.

I executed no trades last week. Concierge members received a LEAPS trade alert on Crown Castle International (CCI), which regular subscribers should receive shortly. My longs in Tesla (TSLA) and Freeport McMoRan (FCX) expired at max profit, which I easily ran into the June 16 option expiration this week. I now have a very rare 100% cash position due to the lack of high-return, low-risk short-term trades.

A Mad Hedge Market Timing Index at 82 is not exactly encouraging me to bet the ranch. Don’t rush to buy the top.

On another matter, I am proud to say that every Mad Hedge service saw positions expire at their maximum profit at the June 16 quadruple witching options expiration.

Global Trading Dispatch rang the cash register with Tesla (TSLA) and Freeport McMoRan (FCX). The Mad Hedge Technology Letter coined it with Apple (AAPL). The Mad Hedge Biotech & Health Care Letter printed money with Amgen (AMGN). Jacquie’s Post pleased followers with a profit in the (TLT). Finally, Mad Hedge AI, launched only on Monday, saw the shares for its initial trade alert for (UNG) jump a breathtaking 15% in four days.

I must be doing something right.

My Ten-Year View

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

Dow 240,000 here we come!

Tesla Model Y Became World’s Top Selling Car in Q1, the first EV to do so. Some 267,200 Y’s were shifted, edging out Toyota’s Corolla by 10,800 units, which led the field for decades. Elon Musk’s price-cutting volume play is working to the competition’s chagrin. The Model Y is on track to top one million sales this year. Buy (TSLA) on dips

Tesla Drops Model 3 Price to $33,000, net of $7,500 federal EV tax credit. That helped it become the world’s top-selling car. Late to the market EV makers are getting killed, hemorrhaging cash. That took the shares up to a new 2023 high of $231. Keep buying (TSLA) on dips.

Apple Launches $3,497 Vision Pro Headset, in a run at Meta (META) in the virtual headset world. It’s the company’s first new product launch since the Apple Watch in 2014 coining yet another new revenue stream. Apple shares hit a new all-time high on the news. Buy (AAPL) on dips.

Weekly Jobless Claims Jump to 261,000, an increase of 28,000, as the deflationary effects of high-interest rates take hold.

Europe Enters a Recession, with a -0.1% GDP print in Q1. Sharp rises in Euro interest rates get the blame.

General Motors Adopts Tesla’s Charging System, essentially giving a near monopoly to Elon Musk. (GM) is joining Ford’s (F) capitulation from two weeks ago. This should grow into a $20 billion a year profit item for Tesla. All of my outrageous forecasts are coming true. Buy (TSLA) on dips.

US to Send Another $2 Billion Worth of Advanced Missiles to Ukraine. The package includes advanced Raytheon (RTX) Himars and Lockheed (LMT) Patriot 3 missiles. Buy both (RTX) and (LMT) on dips as both missiles now have order backlogs extending for years.

Coinbase Gets Crushed after the SEC throws the book at them. The government agency is intent on destroying the entire crypto infrastructure. Get your money out if you can. Avoid (COIN) on pain of death.

Volatility Index ($VIX) Hits 3 ½ Year Low, at $14.26. Complacency with the S&P 500 is running rampant, which always ends in tears. The level implies a maximum up-and-down range of only 8.2% for 30 days.

Airline Profits to Double in 2023, as service sharply deteriorates with revenge travel accelerating. Looks for this summer to be a perfect travel storm.

On Monday, June 19 is the first-ever Juneteenth National Holiday celebrating the freedom of the slaves in Texas, the last state to do so. Markets are closed.

On Tuesday, June 20 at 8:30 PM EST, US Building Permits for May are announced.

On Wednesday, June 21 at 10:00 AM, Fed Chairman Powell testifies in front of Congress.

On Thursday, June 22 at 8:30 AM, the Weekly Jobless Claims are announced.

On Friday, June 23 at 9:45 AM the S&P Global Flash PMI is printed.
At 2:00 PM the Baker Hughes Rig Count is printed.

As for me, with the shocking re-emergence of Nazis on America's political scene, memories are flooding back to me of some of the most amazing experiences in my life. I thought we were done with these guys I have been warning my long-term readers for years now that this story was coming. The right time is now here to write it.

I know the Nazis well.

During the civil rights movement of the 1960s, I frequently hitchhiked through the Deep South to learn what was actually happening.

It was not usual for me to catch a nighttime ride with a neo-Nazi on his way to a cross burning at a nearby Ku Klux Klan meeting, always with an uneducated blue-collar worker who needed a haircut.

In fact, being a card-carrying white kid, I was often invited to come along.

I had a stock answer: "No thanks, I'm going to another Klan meeting further down the road."

That opened my driver up to expound at length on his movement's bizarre philosophy.

What I heard was chilling. Suffice it to say, I learned to talk the talk.

During 1968 and 1969, I worked in West Berlin at the Sarotti Chocolate factory in order to perfect my German. On the first day at work, they let you eat all you want for free.

After that, you got so sick that you never wanted to touch the stuff again. Some 50 years later and I still can’t eat their chocolate with sweetened alcohol on the inside.

My co-worker there was named Jendro, who had been captured by the Russians at Stalingrad and was one of the 5% of prisoners who made it home alive in 1955. His stories were incredible and my problems pale in comparison.

Answering an ad on a local bulletin board, I found myself living with a Nazi family near the company's Tempelhof factory.

There was one thing about Nazis you needed to know during the 1960s: They absolutely loved Americans.

After all, it was we who saved them from certain annihilation by the teeming Bolshevik hoards from the east.

The American postwar occupation, while unpopular, was gentle by comparison. It turned out that everyone loved Hershey bars. Americans became very good at looking the other way when Germain families were trying to buy food on the black market. That’s why Reichsmarks wasn’t devalued until 1948.

As a result, I got free room and board for two summers at the expense of having to listen to some very politically incorrect theories about race. I remember the hot homemade apple strudel like it was yesterday.

Let me tell you another thing about Nazis. Once a Nazi, always a Nazi. Just because they lost the war didn't mean they dropped their extreme beliefs.

Fast-forward 30 years, and I was a wealthy hedge fund manager with money to burn, looking for adventure with a history bent during the 1990s.

I was mountain climbing in the Bavarian Alps with a friend, not far from Garmisch-Partenkirchen, when I learned that Leni Riefenstahl lived nearby, then in her 90s.

Attending the USC film school decades earlier, I knew that Riefenstahl was a legend in the filmmaking community.

She produced such icons as Olympia, about the 1932 Berlin Olympics, and The Triumph of the Will, about the Nuremburg Nazi rallies. It is said that Donald Trump borrowed many of these techniques during his successful 2016 presidential run.

It was rumored that Riefenstahl was also the one-time girlfriend of Adolph Hitler.

I needed a ruse to meet her since surviving members of the Third Reich tend to be very private people, so I tracked down one of her black and white photos of Nubian warriors, which she took during her rehabilitation period in the 1960s.

It was my plan to get her to sign it.

Some well-placed intermediaries managed to pull off a meeting with the notoriously reclusive Riefenstahl, and I managed to score a half-hour tea.

I presented the African photograph, and she seemed grateful that I was interested in her work. She signed it quickly with a flourish.

I then gently grilled her on what it was like to live in Germany in the 1930s. What I learned was fascinating.

But when I asked about her relationship with The Fuhrer, she flashed, "That is nothing but Zionist propaganda."

Spoken like a true Nazi.

The interview ended abruptly.

I took my signed photograph home, framed it, and hung it on my office wall for a few years. Then I donated it to a silent auction at my kids' high school.

Nobody bid on it.

The photo ended up in storage at my home, and when it was time to make space, it went to Goodwill.

I obtained a nice high appraisal for the work of art and then took a generous tax deduction for the donation, of course.

It is now more than a half-century since my first contact with the Nazis, and all of the WWII veterans are gone. Talking about it to kids today, you might as well be discussing the Revolutionary War.

By the way, the torchlight parade we saw in Charlottesville, VA in 2017 was obviously lifted from The Triumph of the Will, except that they didn't use tiki poolside torches in Germany in the 1930s.

Good Luck and Good Trading

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

Leni Riefenstahl

Olympia

June 5, 2023

Diary, Newsletter, Summary

Global Market Comments
June 5, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or HERE IS THE NEXT BIG PLAY),
(FCX), (X), (CAT), (DE), (CLV), (UNG), (OXY), (RIO), (BHP), (TSLA)

CLICK HERE to download today's position sheet.

April 14, 2023

Diary, Newsletter, Summary

Global Market Comments
April 14, 2023
Fiat Lux

Featured Trade:

(APRIL 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(GLD), (GDX), (GOLD) (MSFT), (JPM), (BAC), (C), (BRK/B), (TLT), (FLIN), (EPI), (INDA), (FXI), (UNG), (FRC)

CLICK HERE to download today's position sheet.

April 12 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the April 12 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, CA.

Q: Should I “Sell in May and go Away”

Why wait until May? Up 49% YTD, we’ve already picked the low hanging fruit for 2023. The market is now at the top end of the range in the face of a weakening economy. Maybe there is another 100 points of upside potential in the market versus 400 points of downside risk. The markets have pulled forward not only the first quarter’s performance, but possibly that for the entire year. That’s what an $18 (VIX) is telling you. The game from here is to buy the next bottom in big technology stocks for an explosive second half move up to (SPY) $4,800. This is a short-term call only. Keep all your one- and two-year LEAPS. The market won’t fall enough to justify a round trip in these illiquid positions.

Q: How do I avoid assignment risk with these call spreads and put spreads?

A: You don't want to avoid it. You want to be exercised early on the short leg of your call spreads because it allows you to take 100% of the profits well before expiration day. Some people were getting called on the banking call spreads last week because dividends were imminent and I had to explain how lucky they were. The reason hedge funds call away these options is that they want to buy the stock one, two, or three days before the stocks go ex-dividend, so they can get an immediate payoff and then get rid of the position. In the case of JP Morgan (JPM), they paid out a $1 dividend on Monday last week, so we had a lot of exercises right before that. All you have to do is call your broker (they’re not allowed to do this unless you call them), tell them to exercise your long option to meet your short, and you’re out of the position at max profit and you get the money immediately. So that is the issue. Only stocks that pay dividends or interest get called away, so the high dividend things like the banks or the iShares 20 Plus Year Treasury Bond ETF (TLT) will get called away. Zero dividend stocks almost never get called away unless someone is trying to cover a short in aftermarket hours. My experience is that only 1% of your positions ever get called away.

Q: What are your thoughts on the bottom for United States Natural Gas Fund (UNG) and what will trigger the reversal on it?

A: The bottom is somewhere around here—we’re very close to or even below some of the historic bottoms for natural gas over the last 20 years, which is around $2/MM BTU for natural gas. We could bounce around here for a while. The trigger for the recovery will be a stronger economic recovery in China, which is the world's largest natural gas importer. When the Ukraine War broke out, a lot of that gas got diverted to Germany. Those contracts are now expiring and we’re in a position now where we can start re-exporting that gas to China. They’ll take all we can produce. So that should be positive for Nat Gas. Also, because of the damage caused by the explosion at the Cheniere Energy (LNG) export facilities in Texas, our capacity to exported was impaired for many months. Those are coming back online now. This is why you look at Nat Gas now, and is why I put on a two-year LEAPS instead of a one-year.

Q: Would I go into cash with my favorite stocks?

A: Yes, for the short term. No, for the long term. All of my stocks are great long-term holds, but if you’re day trading or weekly trading or monthly trading, now is not a bad place to go cash so you have lots of dry powder on the next meltdown, especially with 90-day T-bills giving you 5%.

Q: Should we purchase gold bullion as a small percentage of our portfolio?

A: Better to buy gold stocks like SPDR Gold Trust (GLD), VanEck Gold Miners ETF (GDX), and Barrick Gold (GOLD) and Newmont Mining (NEM). Gold bullion is expensive to store, is heavy, takes up a lot of space in your safe deposit box, and it can be stolen—that is the problem with physical assets. I prefer the financial assets, the gold miners, to the underlying metal, which should perform at 4x the rate of actual gold.

Q: Have you changed your December 2024 view on bank stocks?

A: No.

Q: Is it true that Warren Buffet thinks the banking crisis is not over?

A: Yes it is, but it will be confined to smaller banks, which are losing their deposits to larger banks like JP Morgan (JPM), Bank of America (BAC), Citibank (C), and Berkshire Hathaway (BRK/B). It’s the regional banks that are going to have a much more difficult time rolling over real estate loans that are coming due. You have a $1.5 trillion of commercial real estate loans coming due in the next year, and these loans originally were taken out at 0% or 2% or 3%. They’re now going to have to refinance at 7%, 8%, 9% or 10%, and that will create a problem because a lot of their borrowers don’t qualify for their loans anymore. That’s going to be a drag but it’s going to hit the Midwest in one-off situations that can be easily ring-fenced. The net effect of the regional banking crisis is going to be to suck money out of the middle part of the US and park it on the coasts where the big banks are, mostly on the east coast.

Q: Based on your view, the market is due for a short-term correction, would you keep long-term LEAPS on the banks?

A: Absolutely yes. First off the banks have already had their correction, thanks to the regional banking crisis. If you have any downside in banks it will be minimal, the upside is maybe 10x greater than the downside in banks. So yes, you keep your LEAPS, and that’s why you have long-term LEAPS—to take the long-term view and just forget about them, don’t even look at them day to day because they won’t change. The time value on those long-dated options is so great that you get very little day-to-day movement in the actual price.

Q: How are you going to be successful with AI?

A: Well you hire only the absolute best software engineers, which we have here in San Francisco and Silicon Valley. How to invest in AI is much harder; there are no pure AI plays. Microsoft bought the frontrunner for $13 billion, ChatGPT, and any other participants in cutting edge AI are all giant companies where it’s just a small part of their business. However, down the road, like in a year or two or three, you will be invited to buy pure AI spinoffs at tremendously inflated multiples, and that will be the only way to get in. That might be the top for the stock. I’ve only seen this happen like 100 times before, why should AI be any different? The best way to benefit from AI is to use it yourself, just like when Microsoft brought out Office—there was no way to get a pure play on Microsoft Office other than buying Microsoft (MSFT) itself. You did a lot better using the apps for your own business and your own investment styles. The big view on AI is that it will double the value of all existing companies that you already own by cutting costs and improving service value. That part of my Dow 240,000 call.

Q: Do you like Chinese solar stocks?

A: No, China has its own unique political risks which I don’t want to get involved with right now. And even the solar companies in the US are hugely overbought. Great long-term businesses for all of these companies, but the stocks have already discounted a decent chunk of that, there are better fish to fry, like bank stocks for example. The best way to play China is to buy the surrounding emerging countries (EEM) it buys from, not China itself.

Q: I hear that India is the next China. How best to play it?

A: That’s true, India is the next China; but it won’t grow at the peak rate that China did in its best days in the 2000s, which is a growth rate of around 13% a year. India might do half of that, and the simple answer is that China is a dictatorship and could order what they needed to do to max out growth. India is a democracy and can’t do things like arbitrary land seizures or big infrastructure projects and so on. So, that will cut the growth rate in India by half but that’ll still be double America’s long term growth rate, which is a mature economy. And the ETFs to play there in India are (FLIN), the (EPI), and the (INDA). Those are three good index ETFs in India.

Q: Do you expect a 2.5% US Treasury yield by year-end?

A: Yes, and in fact we’ve already done half of that move from the 4.60% yield that we have at the peak last October. So yes, the trend is our friend, and the hard thing to do in the bond market is to get into it, because everybody in the world is now expecting lower interest rates.

Q: What options spreads would you do on the iShares 20 Plus Year Treasury Bond ETF (TLT)?

A: Well here, none, because we’re at a high for the year, but wait for a $5 point selloff and then do $5 points in-the-money. That’s what I do like clockwork, don’t even think about it. If we drop more that $5 I’ll just buy more.

Q: Do you expect Natural Gas (UNG) to be higher by the end of the year for the current price?

A: Absolutely, yes, 8 months is more than enough time to get China online again and buying all the natural gas they can get their hands on unless they invade Taiwan.

Q: Any interesting LEAPS on First Republic Corporation (FRC)?

A: You can buy the July 2023 $22.500$25 vertical bull call debit spreads LEAPS for 60 cents and see it expire at $2.50 in 15 months. With an incredible implied volatility at 177% that’s the furthest option maturity that is trading. I think the better trade here is just to buy the stock. You’re going to be limiting your upside with a LEAPS. With a “BUY” in the stock here, you’re looking at 2, 3, 4 times upside potential in a recovery—and remember this thing’s trading at $14, it used to be trading at $100 a month ago. So, don’t limit your upside with an options trade on something that’s clearly extremely oversold after a 90% down-move in a month. That's a rare situation. Full disclosure: I own (FRC). I bought some at $15 and I bought more at $12, just as a go-crazy trade—but I know the (FRC) bank and the management.

Q: How to buy Natural Gas?

A: You buy (UNG), the ETF, to make it really easy. Just remember you have a -35% one-year contango on that so it’s got to go up more than 35% in a year for you to make money.

Q: Any risk of holding banks and brokers through earnings?

A: I would say not much. If they announce surprise losses, they’ll be small. The first quarter was actually a very good quarter for banks and brokers because they made tons of money on their options business, where the volumes have doubled. And the banking crisis didn’t really kick in during the first quarter, at least from a business point of view. So, I don’t expect downside surprises—if there are, it will be small ones, not worth selling and trying to get back in because you’ll just end up paying a higher price.

Q: Are we building new nuclear plants?

A: No, but we had the first expansion in 7 years of the exiting Vogtle plant in Georgia which added a new reactor. The real demand will come from new designs of nuclear plants and the US modernizing its nuclear weapons designs. All of the nuclear fuel that we bought from the Soviet Union after its collapse 30 years ago has all been used up. It ran all of the nuclear power plants in the US for 20 years. That has run out and the prospects of resupplying from Russia now are zero.

Q: Do you foresee China invading Taiwan?

A: Never going to happen. If China (FXI) does invade Taiwan they 1.) lose their entire foreign food supply from the US and 2.) lose all their trade with the US that they need to earn the money to pay for food from other sources like Australia and Russia. So, never going to happen, but they will keep bluffing all year, as they have done continuously since 1949.

Q: Could commercial real estate be a problem for large insurance companies?

A: Only if the default rate goes up; and again, it’s going to be a case-by-case basis where they invested—is it Manhattan or San Francisco where the vacancy rates are at all-time highs at 30%, or is it the Midwest, where the credit quality has deteriorated the most, and is looking at the higher default rates? What is more likely is that interest rates will fall sharply by 2024 bailing these companies out.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER then WEBINARS, and all the webinars from the last 12 years are there in all their glory.

Good Luck and Stay Healthy,

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

1976 in Laos

March 24, 2023

Diary, Newsletter, Summary

Global Market Comments
March 24, 2023
Fiat Lux

Featured Trade:

(MARCH 22 BIWEEKLY STRATEGY WEBINAR Q&A),
(IBB), (INTC), (AMD), (XLU), (NVDA), (TSLA), (FRC), (QQQ), (SPY), (TLT), (UNG), (USO), (VLO), (DINO), (SUN), (FCX), (JPM), (RIVN), (DVN), (LNG), (KMI), (DAL)

CLICK HERE to download today's position sheet.

March 22 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the March 22 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.

Q: I have big losses in biotech (IBB) but am a long-term believer—do you think it will recover?

A: Yes, I do. But we are still looking at the post-COVID hangover, where Biotechs rocketed for about a year. We’re simply coming off that overbought situation. In the meantime, the industry continues to generate groundbreaking discoveries at the fastest rate in history. When those translate into profit-making products, the stocks will perform, and many of them already have.

Q: Advanced Micro Devices (AMD) appears to be overbought, what are your thoughts?

A: Yes absolutely, the whole chip sector is overbought, because guess what, they benefit from falling interest rates and an economic recovery. That group will absolutely lead going into the future, and it’s hard to get into—these things just go up in a straight line. Look at Nvidia (NVDA), it has more than doubled since the October low and you barely get pullbacks. It’s looking like Nvidia is going to take over the world; we’d love to get into it but it seems like it will only be a high-risk/high-reward stock. They are now having the tailwind with Chat GPT—which everyone has to own now or go out of business—and buy Nvidia chips to make it work.

Q: Would you recommend banks and brokerages here?

A; Yes, because of the banking crisis, they’ll be the best performers as we come out of it. The end of the interest rate rising cycle is now in sight, and we are about to enter the golden age of banking. Institutions are buying stocks for that now. And your next entry point will be Friday because the pattern has been to sell off everything on Fridays in expectation of a new bank going under on the weekend. If nothing happens, then you have a big rally on Monday morning. So that you can probably play.

Q: Are there recordings of this webinar?

A: Yes, to find all past recordings, just go to www.madhedgefundtrader.com and log in.

Q: When does Intel (INTC) become a buy, if ever?

A: It’s probably a “BUY” right here. You never want to buy a tech company run by a salesman, and that’s what happened with Intel. As soon as you had a salesman guaranteeing he’d turn the company around, the stock dropped by half. So down here, it’s looking more likely that they’ll fire the head of Intel, get an engineer back in charge, and the stock should double. But clearly, it’s the only value left in the semiconductor area.

Q: Would you double up on the United States Natural Gas Fund (UNG)?

A: Yes, and I'd be doing 2-year (UNG) LEAPS. There’s no way you have an economic recovery over the next two years that will get us a double, triple, or quadruple in the price of natural gas, and (UNG) will catch that move less 35% for the contango (the 1-year differential between front month and one-year futures contracts).

Q: What’s your favorite tech stock to buy on the dip?

A: It has to be Tesla (TSLA). And I’m in the middle of writing a massive opus on the Tesla Investors Day, which included far more news and content than people realize. That's because you have journalists covering investors' day, not engineers. So I’ll get to the engineers’ and scientists view, which is much more interesting.

Q: Buy bitcoin after the financial contagion?

A: No, bitcoin is what you bought at the market top because there was nothing else to buy because everything else was so expensive. Now everything else is cheap when you can buy Apple (AAPL) at $160, Nvidia at $272 (NVDA), or Tesla (TSLA) at $200. Those are far better choices than a purely speculative asset class which you may never see again once you send in your money. That has been the experience of a lot of people.

Q: Should I sell short the Utility ETF (XLU) if investors head into growth stocks?

A: No, utilities are very heavy borrowers with big capital requirements, and also will benefit heavily from falling interest rates. Basically, everything goes up on an economic recovery. So, your short ideas were great a year ago, not so much now. Now we’re looking for long plays, and just a few hedges, like in bonds, to control risk.

Q: What's the net entry point for Freeport McMoRan (FCX)?

A: I would say here, and my target for this year for Freeport is at the very least hitting $50 again; someday we hit $100, once we get another ramp-up for EV production and the demand for copper sores accordingly.

Q: I hear China has a battery that will go 600 miles and is coming soon.

A: Tesla has a battery that will go 1,000 miles now, but it can only be recharged once. It turns out that the military is very interested in using these, converting Humvees to EVs; then you could parachute them charged batteries which you just pop in. That eliminates having to move these giant bladders of gasoline which easily explode. So yes, the 1,000-mile battery has actually been around for 10 years but can’t be mass-produced. That is the issue.

Q: How will Tesla deal with hydrogen?

A: It will ignore it. Hydrogen will never go mainstream—it can’t compete with an existing electric power grid. But there are fleet or utility applications that make sense; so other than a small, limited fleet confined to a local area, I don't see hydrogen ever catching up. And Saudi Arabia can easily convert their entire oil supply into hydrogen to create a “green” carbon-free fuel. Remember, the cost of electric power cars is dropping dramatically—at about 20% a year—so hydrogen has to keep up with that too which they’re not.

Q: Please explain a bank LEAPS.

A: You buy a call option, you sell short a call option higher up, and you do it with a maturity of one year longer, or more. That’s what makes it a LEAPS. If you want more details, just go to www.madhedgefundtrader.com, and search LEAPS and a full explanation of how to execute these will come up.

Q: What do you think of Rivian (RIVN)?

A: It’s a long-term play—they got knocked down by half on their latest $1.2 billion capital raise, which everybody knew was coming, but still seemed to surprise some traders. It’s a long-term hold, not a short term trade. That said, it’s tempting to do LEAPS on Rivian right here going out two years. The stock is down 95% from the highs.

Q: What level LEAPS do you do on JP Morgan (JPM)?

A: I sent that out to everybody last week—that would be to buy the $130 call option and sell short the $135 call option for January of 2024. That way the stock only has to go up 4% for you to make a 100% return on that investment. That’s why we love LEAPS.

Q: I had First Republic Bank (FRC) at $30, took a bath, and got rid of it. Should I have held on?

A: Yes. There's nothing wrong with First Republic's business, and that’s what's new in all of this current round of bank failures—the assets are fine. Usually when a bank goes under it’s because they extended too many dubious loans that defaulted. First Republic not only has a great loan book, but a great asset base in high-net-worth individuals. This is not a bank you would normally expect to go under. Which is why private banks are pouring money into it to save it. I’d be a buyer at the $10 level if we get down that far again. And I actually bought a little bit of First Republic myself on Monday, the meltdown day at $15, with the theory that it will get bailed out and the stock goes up ten times.

Q: Would you do vertical credit spreads on the SPDR S&P 500 ETF Fund (SPY) or Invesco QQQ ETF (QQQ) with the $2 spread?

A: No, the big money is made on single stocks, which have double or triple the volatility of indexes, and you know which single stocks to buy right now—the ones that just had a big selloff. You want more volatility at market bottoms, not less; and I would recommend doing all the financial and call spreads and LEAPS right here. They will have higher volatility and deliver much better risk/reward ratios. That is basic trading 101: you short indexes on the way down, you buy single stocks on the way up. That's what every hedge fund worth its salt does.

Q: Do you have an opinion on Zero Days to Expiration causing greater volatility?

A: Absolutely, it is—especially on Fridays. And I'm not doing these because they are basically lottery tickets. But, if it's a coin toss on whether you make money or not, and you write off the bad ones and make a nice profit on the good ones, that could be a profitable trade. I actually have several followers experimenting with that type of strategy, so I'll let you know if they make any money on it.

Q: What do you think about oil in this environment?

A: It’s discounting a recession which is never going to happen; so oil and oil plays are probably a good trade here, especially with front-month calls. I would be going for Valero Energy (VLO) and the refiners like Sinclair (DINO) and Sunoco (SUN), rather than the big producers because they have already had big moves which they have held onto mostly. Expect oil to go up—I’d be buying the commodity here (USO) and I’d be buying the United States Natural Gas Fund (UNG).

Q: What's the maximum downside in the next 30 days?

A: Well I showed you on that S&P 500 (SPY) chart at the beginning—$350 is the worst-case scenario with a deep recession, and that assumes the banking crisis doesn’t go away and gets worse. I think the banking crisis is done and getting better so we won’t test the downside, but the unanticipated can happen, so you have to be ready for anything. The non-recessionary low looks to be $375.

Q: What if you can’t do spreads in an IRA, like for iShares 20 Plus Year Treasury Bond ETF (TLT)?

A: Just buy the (TLT) outright, or buy it on 2:1 margin. (TLT) is probably a great buy around 100 or 101. ProShares has the 2X long Ultra Treasury ETF (UBT), but the fees are high, the spreads are wide, and the tracking error is large, as is standard for these kinds of instruments.

Q: When taking a position in LEAPS, how do you decide the position size per holding?

A: I send out all the LEAPS assuming one contract, then you can adjust your size according to your own experience level and risk tolerance. Keep in mind that if I’m wrong on everything, the value of all LEAPS goes to zero, so it may not be for you. On the other hand, if I am right on my one-year and two-year views, all these LEAPS will deliver a 100-120% return. You decide.

Q: Are you expecting a seasonal rally in oil?

A: Yes I am, and we’re coming off very low levels. Buy the United States Oil ETF (USO) and buy the United States Natural Gas Fund (UNG).

Q: Is a recession still on the table with all the banking crises?

A: No, if anything, it brings the end of any possibility of a recession because it’s bringing interest rate cuts sooner than expected, which brings a recovery that’s sooner than expected. And that’s why you’re getting interest-rate-sensitive stocks holding here and starting to rally.

Q: My retirement account won’t let me buy (UNG)—Are there any other good companies I can buy?

A: Yes, Devon Energy (DVN) is big in the gas area. So are Cheniere Energy (LNG) and Kinder Morgan (KMI).

Q: If the market is oversupplied with oil, why is gasoline so expensive?

A: Endless middlemen add-ons. This is one of the greatest continuing rip-offs in human history—gasoline prices always take the elevator up and the escalator down, it’s always that way. And that's how oil companies make money—by squeezing consumers. I’ve been tracking it for 50 years and that’s my conclusion. The State of California has done a lot of research on this and learned that only half of their higher prices are from taxes to pay for roads and the other half comes from a myriad of markups. Also, a lot of businessmen just don’t want to be in the gasoline retailing business and will only enter when the returns are very high. Plus, oil companies are trying to milk companies for all their worth right now because the industry may disappear in 10 years. Go electric, that’s my solution. I haven’t bought gasoline for 13 years, except for my kids. I only buy cars for my kids at junkyards and fix them up. If they want to do better they can go out and earn it.

Q: Do we need to worry about China supporting Russia in the war against Ukraine?

A: Not really, because all we have to do to cut off Chinese supplies for Russia is to cut off trade with China, and their economy will completely collapse. China knows this, so they may do some token support for Russia like send them sweatshirts or something like that. If they start a large arms supply, which they could, then the political costs and the trade costs would be more than it’s worth. And at the end of the day, China has no principles, it really is only interested in itself and its own people and will do business with anybody.

Q: What do you think about the recovery in solar?

A: What’s been going on in solar is very interesting because for the last 20 years, solar has moved one to one with oil. So, you would expect that from collapsing oil prices and more price competition from oil, solar would collapse too. Instead, solar has had tremendous moves up and is close to highs for the year. The difference has to be the Biden alternative energy subsidies, which are floating the entire industry and accelerating the entire conversion of the United States to an all-electric economy. So they've had great runs. I wouldn’t get involved here, but it’s nice to contemplate what this means for the long-term future of the country.

Q: Should I buy the airline stocks here?

A: Yes, I’d go for Delta (DAL). Again, it’s one of the sectors that’s discounting a recession that’s not going to happen. They’re going to have the biggest airline boom ever this summer as the reopening trade continues on for another year, and a lot of pent-up travel demand hits the market.

Q: Do you like platinum?

A: I do—not because of EVs but because of hydrogen. You need platinum for hydrogen fuel cells to work. That’s a brand new demand, and there’s supposed to be a shortage of half a million ounces of platinum this year.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.

Good Luck and Stay Healthy,

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

March 23, 2023

Diary, Newsletter, Summary

Global Market Comments
March 23, 2023
Fiat Lux

Featured Trade:

Trade Alert - (UNG) LEAPS – BUY
(UNG), ($NATGAS), (BOIL)

CLICK HERE to download today's position sheet.

Trade Alert - (UNG) LEAPS - Buy

Diary, Newsletter

BUY the United States Natural Gas Fund (UNG) January 2025 $14-$15 deep out-of-the-money vertical Bull Call debit spread LEAPS at $0.25 or best

Opening Trade

3-23-2023

expiration date: January 17, 2025

Number of Contracts = 1 contract

Natural gas has just given up its entire recent gain. Forecasts of mild spring weather and recession fears are the reasons. So I am diving back in.

Natural gas at one point fell some 80% since it peaked in June of 2022. It is now down so much that you have to buy it even if you hate it.

The much-predicted nuclear winter in Europe never showed. Instead, the continent enjoyed one of the warmest winters on record, with some ski resorts completely devoid of snow. To save Europe’s bacon, the US government ordered the diversion of dozens of natural gas carriers from China to Europe. The Middle East also ramped up its gas exports.

Now, we have recession fears. Storage in both Europe and the US is near all-time highs.

What happens next is that Covid burns out in China, allowing the economy to recover and sending the demand for natural gas through the roof. The Freeport McMoRan’s export facility in Quintana, TX that blew up a few months ago is coming back on stream.

That screeching sound you hear is natural gas wells being shut down, which happens every time we approach the $2.00 price in gas. That is sowing the seeds of the next shortage. That sets up an easy double for gas from here. While gas may not yet have hit its final bottom, it is close enough to do a trade here.

While the chance of winning a real lottery is something like a million to one, this one is more like 10:1 in your favor. And the payoff is 300% in a little less than two years. That is the probability that (UNG) shares will rise over the next 23 months.

I have been through a half dozen energy cycles in my lifetime, and I can see another one starting up.

I am therefore buying the United States Natural Gas Fund (UNG) January 2025 $14-$15 deep out-of-the-money vertical Bull Call debit spread LEAPS at $0.25 or best.

Don’t pay more than $0.50 or you’ll be chasing on a risk/reward basis.

I think all carbon energy sources eventually go to zero over the next 20 years as they are replaced by alternatives, but we will have several doubles in price on the way there. This is one of those doubles.

But don’t ask me. I only drilled for natural gas in Texas and Colorado for five years in the late 1990s using a revolutionary new technology called “fracking.” I moved on after making a fortune, buying gas for $2 and selling it for $6 or $7.

To learn more about the United States Natural Gas Fund (UNG), please click here.

Please note that these options are illiquid, and it may take some work to get in or out. Executing these trades is more an art than a science.

Let’s say the United States Natural Gas Fund (UNG) January 2025 $14-$15 deep out-of-the-money vertical Bull Call debit spread LEAPS are showing a bid/offer spread of $0.10-$0.90, which is typical.

Enter an order for one contract at $0.10, another for $0.20, another for $0.30 and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then enter an order for your full position at that real price.

A lot of people ask me about the appropriate size. Remember, if the (UNG) does NOT rise by 85.9% in 23 months, the value of your investment goes to zero.

If by chance (UNG) rises quickly, which it might, you don’t have to wait the full two years. You can take profits at any time.

The way to play this is to buy LEAPS in ten different companies. If one out of ten increases ten times, you break even. If two of ten work, you double your money, and if only three of ten work you triple your money.

You never should have a position that is so big that you can’t sleep at night, or worse, need to call John Thomas asking if you should sell at a market bottom.

Keep in mind that (UNG) has a substantial “contango” of 35% to overcome. That means the futures one year out are selling at a 35% discount. So, gas has to rise by 35% in a year for you just to break even. The contango covers gas storage charges and the cost of carry for borrowed money.

Notice that the day-to-day volatility of LEAPS prices is miniscule since the time value is so great. This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious but getting screwed by overpaying for a position is even more tedious.

Look at the math below and you will see that an 85.9% rise in (UNG) shares to $15 will generate a 300% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 3.5:1 across the $14-$15 space.

I have done the math here for a single contract. You can adjust your size accordingly.

If you want to get much more aggressive on the natural gas trade, you can buy the ProShares Ultra Natural Gas ETF (BOIL), a 2X long leveraged ETF. Keep in mind that 2X ETFs have much higher costs, wider dealing spreads, and greater tracking errors. This is really designed for short-term or even day trading. (BOIL) is down a staggering 97% from its June high.

Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it.

This is a bet that the (UNG) will not fall below $15 by the January 17, 2025 options expiration in 23 months.

Here are the specific trades you need to execute this position:

Buy 1 January 2025 (UNG) $14 call at…………...……$2.60

Sell short 1 January 2025 (UNG) $15 call at…………$2.35

Net Cost:…………………...……….………..………….….....$0.25

Potential Profit: $1.00 - $0.25 = $0.75

(1 X 100 X $0.75) = $75, or 300% in 23 months.

To see how to enter this trade in your online platform, please look at the order ticket below, which I pulled off of Interactive Brokers.

If you are uncertain on how to execute an options spread, please watch my training video on “How to Execute a Vertical Bull Call Debit Spread” by clicking here.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don’t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

March 10, 2023

Diary, Newsletter, Summary

Global Market Comments
March 10, 2023
Fiat Lux

Featured Trade:

(THE MAD HEDGE TRADERS & INVESTORS SUMMIT IS ON MARCH 14-16)
(MARCH 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (TLT), (UUP), (FXY), (FXB), (FXE), (FXA), (UNG), (BOIL), (AAPL), (TSLA), (WW), (BHP), (NVDA), (RIVN), (FCX)

CLICK HERE to download today's position sheet.

March 8 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the March 8 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, CA.

Q: Do you think the US dollar will drop this year?

A: Absolutely it will drop; in fact, the drop started in October last year. We’re actually six months into a bear market for the US dollar (UUP), and bull market for the yen (FXY), the British pound (FXB), the euro (FXE), and the Australian dollar (FXA). However, the rate-cutting scenario is on vacation, and when it comes back from that vacation, then we will see very sharply dropping interest rates, soaring bond prices, and a weak dollar. That scenario is certain to happen by year-end, probably by 10 or 20% —quite a lot. If you just want to buy the basket for foreign currencies, you can sell short the Invesco DB US Dollar Index Bullish Fund (UUP).

Q: Can stocks (SPY) and bonds (TLT) go up at the same time?

A: Well, they shouldn’t, and usually they don’t. But this time it’s different now because we’re all beholden to the interest rate decisions of the Fed. All asset classes are moving together like synchronized swimmers, which means that on days when the market believes that Powell is finished raising rates, you get big bull moves in stocks, bonds, commodities, precious metals, and beanie baby collectibles. And on the bad days like yesterday, where Powell really reiterates how tough his stance is on inflation is unchanged, everything falls in unison. It’s really become a liquidity/confidence/inflation on-off type market. We have been playing that like a maestro for the last six months and have made a ton of money. I hope it continues that way. “If it’s working, don’t fix it” is my philosophy on trading, which is constantly changing.

Q: Do small caps underperform or overperform in a rising rates era?

A: They always do poorly because small caps have fewer cash reserves, more leverage, and more exposure to interest rates, as opposed to large caps which, in the tech area, don’t borrow at all. They’re actually net creditors to the system so they make more money when interest rates go up. I imagine the interest income at Apple this year has to be absolutely gigantic. That said, small caps always lead recoveries because of their excess leverage, so that's why people are piling into small caps on dips right now. Going from terrible to just bad often generates the best stock returns.

Q: How long will “steering wheel falling off” news tank Tesla?

A: Well, it was worth a $6 dollar drop today in an otherwise weak market. First of all, if there are any actual problems with Tesla, they fix them immediately for free, and most of the fixes can be done with a software upgrade which they do at midnight the day of the recall. Second, a lot of these stories about Tesla problems are false, planted there by the oil industry, trying to head off their own demise. Third, when you go from making several thousand to several million cars a year, scaling up to mass production always uncovers some sort of manufacturing flaws. Tesla can fix them faster than anyone else. I remember when the first Model S came out 13 years ago, we had a hot day and all the sealants on the windows melted. They said they didn’t know because it doesn’t get that hot in Fremont California where they build the cars. They sent out a truck the next day and installed all new sealants on our windows. So that is part of living with Tesla, which seems bent on taking over the world. And I’m working on a major update on Tesla report. I listened to the whole 3.5-hour investors day, and I'll get that out when I get all the snow shoveled. Full disclosure: Elon Musk personally gave me a free $12,800 Tesla Powerwall three years ago. It’s the red one.

Q: I just bought the United States Natural Gas Fund (UNG) 14/15 2025 LEAP for $0.20 with UNG down 3%.

A: I’m going to share that LEAPS with all the Global Trading Dispatch members tomorrow. So far, only the Mad Hedge Concierge members have seen it. We’ll go into great detail in tomorrow’s letter about why you want to buy natural gas here and how you want to play it.

Q: It seems the Fed won’t be happy unless there’s a recession; am I reading this wrong?

A: I think Powell is striving for perfection—killing off inflation and lowering interest rates without a recession. I actually am hoping for a recession myself, even if it’s just for one quarter because that greatly increases market volatility and makes my bond long look like a stroke of genius. And let’s see if he can pull it off. He’s coming facing so many unprecedented challenges to the economy, like the pandemic, the end of liquidity, and the extreme worker shortage. It’ll be really interesting to see what happens. Multiple PhD theses in economics begging to be addressed in there.

Q: Will artificial intelligence cause another bubble?

A: Absolutely, yes. And if you’ve been in the market long enough, you become a bubble collector like me. Just off the top of my head, 3D printing, cold fusion, bitcoin, portfolio insurance, Nifty 50, eyeballs,—if I spent more time, I could come up with an endless list. And this is how Wall Street makes their money—they create bubbles by manufacturing compelling, irresistible stories that can be sold to the masses. Some of these like cold fusion, I know immediately won’t work for 20 years because of my physics background, and definitely not now. Some of these other ones are just flashes in the pan and never work. You just get used to an endless series of bubbles. AI is new only if you haven’t been watching. The share prices of Google, Amazon, Apple, have already had gigantic moves in the last 20 years, largely because of their use of artificial intelligence. So those are your plays—those and (NVDA), which provides the essential chips for artificial intelligence, and we’re active in all of these, both on the long and short side.

Q: Is climate change a hoax or a bubble?

A: If you think it’s a hoax, will you please come over to Incline Village and get the 12 feet of snow off my damn roof before the house collapses. I already can’t close any doors in the house because the weight of the snow is buckling the house and bending the door frames. If you finish the roof, then you can get to work on my deck which also has about 8 ft of snow and is at risk of collapsing, like many in town already have. This has never happened before. The climate has changed.

Q: How come there’s never mention of demographic shift in other parts of the world when there is in the US?

A: The US is the only country in the world where you can earn enough money to retire early. If you live on the coasts, you can sell your house for cash, move inland and never work again, no matter your age. There is no other country where you can do that. Maybe there will be in the future, but definitely not right now. People who complain about how awful the economy is here forget that this is the best economy in the world and has been so for a very long time. I go with the Warren Buffet outlook on this, which is “Never bet against America.”

Q: How about an Entry point for Freeport McMoRan (FCX)?

A: It’s lower. You don’t want to touch it while the entire commodity sector is selling off in fears of higher interest rates in a recession. Once that’s over it goes to $100.

Q: What is the best way to play Natural Gas?

A: I’ll send an extended report tomorrow, but the short answer is United States Natural Gas Fund (UNG) and ProShares Ultra Bloomberg Natural Gas (BOIL), which is a 2x long day trading NatGas ETF.

Q: Are we entering LEAPS territory for Rivian (RIVN)?

A: Yes, just wait for the current selloff to end and then go to the longest possible expiration. This thing will have a multiple move 2x, 3x, or a 10x out the other side of any recession. The CEO is brilliant and people love the cars.

Q: What happens to housing prices when interest rates on mortgages are at 7%?

A: Well, they should go down 10-20%. What they’re actually doing is going sideways, and they’re still going up in the cheaper neighborhoods because of the structural shortage of 10 million houses in the US. The all-cash buyers are still out there buying. There is tremendous inventory shortage in the housing market now; every broker I know got cleaned out of all their inventory in January when we had a brief 100 basis point dip in rates back then, which has since gone away. I think we go sideways in housing until the end of the year, and then big interest rate cuts will be obvious by then, and the market takes off and we have another 10-year bubble. If you think housing is expensive now, go visit Sydney Australia or Shanghai, China and you’ll see how expensive housing can really get.

Q: How how high would Fed funds have to get to cause a real recession?

A: My guess is 6%. We might actually get there in the second quarter. That might trigger enough of a recession to start unemployment rising just enough to let them cut interest rates. My attitude is: rip the Band-Aid off, raise by 75 basis points on March, and get it over with. But Jay Powell is a very gradualist type of guy, even though he’s brought the sharpest interest rate rise in history.

Q: Should I chase Apple (AAPL) here at $150 a share?

A: In this kind of market, you never chase anything. Only buy Apple at $150 if you think happy days are here again and you think we’re going up forever. To me on the chart it looks like we’re double topping and may actually get a lower low, which you then buy. You may even want to do a LEAPS on Apple if we get down into the $130s or $120s again.

Q: Isn’t it hard for the economy to really tank when seniors and savers are now generating income again for their retirement, giving them more income to spend?

A: Well not only that but workers have had 10-20% pay increases also, and they have more money to spend. It’s really hard to see a severe recession in any kind of scenario, barring another pandemic, and that’s why we’re saying buy the dips—we are in fact in a new bull market that started in October. When you get these market reversals, you often don’t get confirmation on the charts for up to a year, and we’re in one of those periods now. That's why there are still a lot of non-believers in the bull scenario and no confidence.

Q: Would you buy Tesla LEAPS?

A: Yes, under $150 on Tesla shares. And, given its record of volatility, we may actually get there, because this is a $1,000 stock easily in 5 years. I'll send you a report giving you all the details of why. Detroit is basically screwed, someday it’ll just be reduced to building Teslas under license from Tesla and painting them different colors and giving them different names or something like that.

Q: What’s a buy-on-dip?

A: Sorry, but no easy answer here. It’s unique to every stock depending on the historic volatility and ranges of the stock. It’s going to be 1% for a stock, it can be 10% for an option, it could be 20% for a stock like Tesla. It’s vague but it really is unique to every single stock. A good rule of thumb is that after you execute a trade and then throw up on your shoes you’ve just done a great trade.

Q: I see from your pictures that you lost weight? How do you do it?

A: I got COVID last May. I lost 20 pounds in two weeks because I couldn’t eat while I was sleeping 20 hours a day. I just woke up long enough to send out trade alerts. All of a sudden, a 40-year collection of expensive designer pants fit. My kids now call me Captain Fancy Pants. When I go through airport security now and take my belt off they fall down so I’m always careful to wear my best underwear, the ones with the dollar sing all over them.

Q: What’s the best way to play obesity drugs?

A: Unfortunately, There is no pure play on obesity drugs. It will be a $150 billion market that will grow very quickly. I will talk about it at length next week in the summit at the Biotech & Health Care webinar, which you’ll get registration links for tomorrow. Weight loss drugs are small pieces of very large drug companies, so the effect gets diluted by everything else they’re doing. The purest play may be Weight Watchers (WW). If you just need to go to Weight Watchers just to get a shot, that could be really good for them. The stock just doubled in one day on this.

Q: Commodity-based foreign stocks are the best bet on inflation protection; should I get involved?

A: Yes, use the current selloff to get into the whole commodity space (except for maybe food) because not only are they a commodity play, they’re a weak dollar play and that way you get a combined double leverage effect on prices, which I've seen happen many times in my life. So yes, look at foreign-type commodity stocks, and of course, the biggest one out there is Broken Hill Proprietary (BHP), which I always watch very closely. It’s the largest stock in Australia owned by virtually everybody in Australia who has any money, with great volatility, and which has recently just had a selloff.

To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, or TECHNOLOGY LETTER, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.

Good Luck and Stay Healthy,

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

2015 in Ouarzazate Morocco