Global Market Comments
May 14, 2021
Fiat Lux
Featured Trade:
(MAY 12 BIWEEKLY STRATEGY WEBINAR Q&A),
(FCX), (QQQ), (JWN), (DAL), (MSFT), (PLTR), (V), (MA), (AXP), (UUP), (FXA), (SPWR), (FSLR), (TSLA), (ARKK), (CLX), (NIO), (EPEV), (SOX), (VIX), (USO), (XLE)
Global Market Comments
April 30, 2021
Fiat Lux
Featured Trade:
(APRIL 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(PFE), (MRNA), (USO), (DAL), (TSLA), (CRSP), (ROM), (QQQ), (T), (NTLA),
(EDIT), (FARO), (PYPL), (COPX), (FCX), (IWM), (GOOG), (MSFT), (AMZN)
Below please find subscribers’ Q&A for the April 28 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley, CA.
Q: There is talk of digital currencies being launched in the US. Is there any truth to that? How would that affect the dollar?
A: There is no truth to that; there is not even any serious discussion of digital currency at the US Treasury. My theory has always been that once Bitcoin works and is made theft-proof, the government will take it over and make that the digital US dollar. So far, Bitcoin has existed regulation-free; in fact, the IRS is counting on a trillion dollars in capital gains being taxed going forward in helping to address the budget deficit.
Q: If you have a choice, what’s the best vaccine to get?
A: The best vaccine is the one you can get the fastest. I know you’re a little slow on the rollout in Canada. Go for Pfizer (PFE) if you’re able to choose. You should avoid Moderna (MRNA) because 15% of people getting second shots have one-day symptoms after the second shot. But basically, you don’t get to choose, only kids get to choose because only Pfizer has done trials on people under the age of 21. So, if you take your kids in, they will all get Pfizer for sure.
Q: Should I buy Freeport McMoRan (FCX) here or wait for a bigger dip?
A: Freeport has just had a 25% move up in a week. I wouldn’t touch that. We put out the trade alert when it was in the mid $30s, and it's essentially at its maximum profit point now. So, you don't need to chase—wait for a bigger dip or a long sideways move before you get in.
Q: How do I trade copper if I don't do futures?
A: Buy (FCX), the largest copper producer in the US, and they have call options and LEAPS. By the way, if we do get another $5 dip in Freeport, which we just had, I would really do something like the (FCX) $45-$50 2023 LEAP. You can get 5 times your money on that.
Q: Time to buy oil stocks (USO) for the summer?
A: No, the big driver of oil right now is the pandemic in India. They are one of the world's largest consumers—you find out that most poor countries are using oil right now as they can’t afford the more expensive alternative sources of power. And when your biggest customer is looking at a billion corona cases, that’s bad for business. Remember, when you trade oil, you’re trading against a long-term bear trend.
Q: Would you buy Delta Airlines (DAL) at today’s prices?
A: Yes, I’m probably going to go run the numbers on today's call spread; I actually have 20% of cash left that I could spend. So that looks like a good choice—summer will be incredible for the entire airline industry now that they have all staved off bankruptcy. Ticket prices are going to start rising sharply with an impending severe aircraft shortage.
Q: What are your thoughts on the Buffet index which shows that stocks are more stretched vs GDP at any time vs 2000?
A: The trouble with those indicators is that they never anticipated A) the Fed buying $120 billion a month in US Treasury bonds, B) the Fed promising to keep interest rates at zero for three years, and C) an enormous bounce back from a once-in-a-hundred-year pandemic. That's why not just the Buffet Index but virtually all technical indicators have been worthless this year because they have shown that the market has been overbought for the last six months. And if you paid attention to your indicators, you were either left behind or you went short and lost your shirt. So, at a certain point, you have to ignore your technical indicators and your charts and just buy the damn market. The people who use that philosophy (and know when to use it, and it’s not always) are up 56% on the year.
Q: What trade categories are getting fantastic returns? It’s certainly not tech.
A: Well, we actually rotated out of tech last September and went into banks, industrial plays, and domestic recovery plays. And you can see in the stocks I just showed you in our model portfolio which one we’re getting the numbers from. Certainly, it was not tech; tech has only performed for the last four weeks and we jumped right back in that one also with positions in Microsoft (MSFT). So yes, it’s a constantly changing game; we’re getting rotations almost daily right now between major groups of stocks. The only way to play this kind of market is to listen to someone who’s been practicing for 52 years.
Q: I am 83 years old and have four grandchildren. I want to invest around $20,000 with each child. I was thinking of your bullish view on Tesla (TSLA) on a long-term investment. Do you agree?
A: If those were my grandchildren, I would give them each $20,000 worth of the ProShares Ultra Technology Fund (ROM), the 2x long technology ETF. Unless tech drops 50% from here, that stock will keep increasing at twice the rate of the fastest-growing sector in the market. I did something similar with my kids about 20 years ago and as a result, their college and retirement funds for their kids have risen 20 times. So that’s what I would do; I would never bet everything on a single stock, I would go for a basket of high-tech stocks, or the Invesco QQQ NASDAQ Trust (QQQ) if you don’t want the leverage.
Q: Do you like Amazon (AMZN) splitting?
A: I don’t think they’ll ever split. Jeff Bezos worked on Wall Street (with me at Morgan Stanley) and sees splits as nothing more than a paper shuffle, which it is. It’s more likely that he’ll break up the company into different segments because when they get to a $5 trillion market cap, it will just become too big to manage. Also, by breaking Amazon up into five companies—AWS, the store, healthcare, distribution, etc., —you’re getting a premium for those individual pieces, which would double the value of your existing holdings. So, if you hold Amazon stock, you want it to face an antitrust breakup because the flotation will double the value of your total holdings. That has happened several times in the past with other companies, like AT&T (T), which I also worked on.
Q: When is Tesla going to move and why is it going up with earnings up 74%?
A: Well, the stock moved up a healthy 46% going into the earnings; it’s a classic sell the news market. Most stocks are doing that this quarter and they did so last quarter as well. And Tesla also tends to move sideways for years and then have these explosive moves up. I think the next double or triple will come when they announce mass production of their solid-state batteries, which will be anywhere from 2 to 5 years off.
Q: How can I renew my subscription?
A: You can call customer support at 347-480-1034 or email support@madhedgefundtrader.com and I guarantee you someone will get back to you.
Q: Top gene-editing stock after CRISPR Therapeutics (CRSP)?
A: There are two of them: one is Intellia (NTLA); it’s actually done better than CRISPR lately. The second is Editas (EDIT) and you’ll find out that the same professionals, including the Nobel prize winner Jennifer Doudna here at Berkeley, rotate among all three of these, and the people who run them all know each other. They were all involved in the late 2000's fundamental research on CRISPR, and they’re all frenemies. So yes, it's a three-company industry, kind of like the cybersecurity industry.
Q: What about PayPal (PYPL)?
A: I would wait for the earnings since so many companies are selling off on their announcements. See if they sell off 3-5%, then you buy it for the next leg up. That is the game now.
Q: Do you like any 3D printing stocks like Faro Technologies (FARO)?
A: No, that’s too much of a niche area for me, I’m staying away. And that's becoming a commodity industry. When they were brand new years ago, they were red hot, now not so much.
Q: Do you see the chip companies continuing their bull run for the next few months?
A: I do. If anything, the chip shortage will get worse. Each EV uses about 100 chips, and they’re mostly the low-end $10 chips. Ford (F) said production of a million cars will be lost due to the chip shortage. Ford itself has 22,000 cars sitting in a lot that are fully assembled awaiting the chips. Tesla alone has $300 worth of chips just in its inverters, and there are two inverters in every car. So, when you go from production of 500,000 cars to a million in one year, that's literally billions of chips.
Q: The airlines are packed; what are your thoughts?
A: Yes, one of the best ways to invest is to invest in what you see. If you see airlines are packed, buy airline stocks. If you can’t hire anyone, you know the economy is booming.
Q: What about the Russel 2000 (IWM)?
A: We covered it; it looks like it wants to break out to new highs from here. By the way, there are only 1,500 stocks left in the Russell 2000 after the pandemic, mergers, and bankruptcies.
Q: Are there other ways to play copper out there like (FCX)?
A: Yes; one is the (COPX)— a pure copper futures ETF. However, be careful with pure metal ETFs of any kind because they have huge contangos and you could get a 50% move up in your commodity while your ETF goes down 50% over the same time. This happens all the time in oil and natural gas, and to a lesser degree in the metals, so be careful about that. Before you get into any of these alternative ETFs, look at the tracking history going back and I think you'll see you're much better off just buying (FCX).
Q: How long do you typically hold onto your 2-year LEAPS? Based on my research, the time decay starts to accelerate after about 3 months to one year on LEAPS.
A: Actually, with LEAPS, the reason I go out to two years is that the second year is almost free, there's almost no extra cost. And it gives you more breathing room for this thing to work. Usually, if I get my timing right, my LEAP stocks make big moves within the first three months; by then, the LEAP has doubled in value, and then you have to think about whether you should keep it or whether there are better LEAPS out there (which there almost always are). So, you sell it on a double, which only took a 30% move in the stock, or you may be committed to the company for the long term, like a Microsoft or an Amazon. And then you just run it through the expiration to get a 400% or 500% profit in two years. That is how you play the LEAP game.
Q: Are these recorded?
A: Yes, we record these and we post them on the website after about 2 hours. Just log into the site, go to “my account”, then select your subscription type (Global Trading Dispatch or Technology Letter), and “webinars” will be one of the button choices.
Q: Can you also sell calls on LEAPS?
A: Yes and the only place to do that is the US Treasury market (TLT). There you either want to be short calls far above the market, out two years, or you want to be long puts. And by the way, if you did something like a $120-$125 put spread out to January 2023, then you’re looking at making about a 400% gain. That is a bet that 20-year interest rates only go up a little bit more, to 2.00%. If you really want to bet the ranch, do something like a $120-$122 and you might get a 1000% return.
Q: What is the best LEAP to trade for Microsoft (MSFT)?
A: If you want to go out two years, I would do something like a June 2023 $290-$300 vertical bull call spread. There is an easy 67% profit in that one on only a 20% rise in the stock. I do front monthlies for the trade alert service, so we always have at least 10 or 20 trade alerts going out every month. And the one I currently have for is a deep in the money May $230-$240 vertical bull call spread which expires in 12 days.
Q: What is the best way to play Google (GOOG)?
A: Go 20% out of the money and buy a January 2023 $2,900-$3,000 vertical bull call spread for $20—that should make about 400%. If you want more specific advice on LEAPS, we have an opening for the Mad Hedge Concierge Service so send an email to support@madhedgefundtrader.com with subject line “concierge,” and we will reach out to you.
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 ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
I Think I See Another Winner
Global Market Comments
March 19, 2021
Fiat Lux
Featured Trade:
(MARCH 17 BIWEEKLY STRATEGY WEBINAR Q&A),
(JPM), (TLT), (TBT), (SQ), (MMM), (SIL), (QQQ), (WMP), (CCIV), (TSLA), (USO), (CRSP), (PLTR), (HYG), (FCX), (XME)
Below please find subscribers’ Q&A for the March 17 Mad Hedge Fund Trader Global Strategy Webinar broadcast from frozen Incline Village, NV.
Q: I’ve heard that the COVID-19 cases are being understated by 16 million. Do you think this is true?
A: Yeah, I've always argued that the previous government's numbers were vastly underestimating the true number of cases out there for political purposes, but we are on the downslide regardless, so that’s good.
Q: When are tech stocks going to bottom out and when can I buy them?
A: I knew I would get this question. This is the question of the day. Picking bottoms is always tough because these are momentum plays and not valuation plays. I’ll give you a couple of levels though. The tech (QQQ) multiple is now at 25X earnings and the S&P 500 (SPY) is at 22X, so your first bottom will be down about 10% from here, or a 22X multiple. And I don’t think we will get much lower than that because tech stocks are growing at 20-25% a year, versus the (SPY) growing at maybe 10%, and I don’t think tech goes to much of a discount in that situation. So, you’re just waiting for interest rates to top out and start to go down, which will be the other indicator of a tech bottom. We had a slowdown in the rise of rates for just a couple of days this week, and tech stocks took off like a rocket. Those are your two big signals.
Q: With the Fed announcement, are you still in the Invesco QQQ Trust NASDAQ ETF (QQQ) bear put spread?
A: Yes, one of them expires in two days so that’s a piece of cake. The other one expires in a month, but it is way out-of-the-money—the April $240-$245 bear put spread, so I’ll keep that for a real meltdown day. But if it looks like we’re getting a breakout, I will come out of that short position so fast it will make your head spin.
Q: Do you like Palantir (PLTR)?
A: Absolutely yes—screaming LEAP candidate. It traded all the way down to $20 two weeks ago and is trading around $25 now. It’s a huge data firm, lots of CIA and defense work, huge government contracts extending out for years, cutting edge technology, and run by a nut job, so yes screaming buy at this level.
Q: Freeport McMoRan (FCX) is taking some pain here, is this still a buy and hold?
A: Yes, it’s taking the pain along with all the other domestic stocks, which is natural. In their case though, it’s up almost 10x from its bottom a year ago where we recommended it, so yeah I'd say time for a rest. So I’m still a buyer of the metals and (FCX) on dips, but like all other metals, it did get overextended. EV manufacturing is doubling this year, which uses a ton of copper. The same is true with solar panels and Chinese industrial recovery. When all your major markets are doubling in size, it’s usually good for the stock. I peaked at $50 in the last cycle and could touch $100 in this one.
Q: What are your thoughts about the Lucid EV SPAC, Churchill Capital IV (CCIV)?
A: Don’t touch it with a ten-foot pole. They only have 1 or 2 concept vehicles for high-end investors to test drive. The rumor is that their main factory will be in Saudi Arabia where the bulk of the seed capital came from. They’ll never catch up with Tesla (TSLA) on the technology. There's always going to be a few niche $250,000 cars out there, and they have no proof they can actually make these things. When they get to a million vehicles a year, then I might be interested. But they haven't done the hard part yet, which is mass-producing battery packs for a million cars. They've only done the easy part which is designing one sexy prototype to raise money. So, stay away from Lucid, I don’t think they’re going to make it.
Q: What about oil?
A: I am avoiding oil plays like the plague.
Q: When do you anticipate your luncheons to be back?
A: Maybe in 2023. I don’t want to scare off my customers by inviting them to a lunch where they all get COVID-19. If I did have a lunch, I’d have a vaccine requirement and a temperature gun to hit them at the door like everywhere else. I really miss meeting subscribers in person.
Q: Should I buy banks like JP Morgan (JPM) at this level?
A: I would say no. That ship has sailed. Wait for a steeper selloff or just let it run. We’ve already had an enormous move and you don’t want to chase it with a low discipline trade, which is what that would be.
Q: What do you think of silver (SLV)?
A: It’s a buy long term, short term it’s in the grim spiral of death along with the other precious metals, which absolutely hate rising interest rates. A silver long here is the equivalent of a bond (TLT) long. When you do go into silver, buy Wheaton Precious Metals (WPM) for the leveraged long play.
Q: Is 3M (MMM) going to extend the upside?
A: Probably yes, that's a classic American industrial play and a great company. I have friends who work there. How could we live without Post-it notes, Scotch Tape, and Covid-19 N-95 masks?
Q: What about Square (SQ)?
A: I love it in the long term, buy on the dips and buy it through LEAPS (long term equity anticipation securities).
Q: Should I unwind my leveraged financial ETF?
A: I’d say take a piece off, yeah; you never get fired for taking a profit. And they have had a tremendous move. Plus of course, the flip side of taking profits on domestic recovery stocks is to buy tech with that money. And eventually, that's what the entire market will do, it just may still be a little bit early.
Q: What’s a good target for LEAPS for CRISPR (CRSP) and Palantir (PLTR)?
A: Put your first strike 30% higher than today’s stock price and go 2 years out in maturity. I noticed on some names, the June 2023’s are starting to trade, but they’re highly illiquid. But if you put a bid in there and you get a market meltdown, you will get hit.
Q: If the long-term future for oil (USO) is so bad, why is it $65?
A: A few reasons. #1, huge short covering action. #2, economy recovery faster than people expected because of the stimulus. #3, a lot of people, mostly in Texas, Oklahoma, and Louisiana, don’t believe that there will be an all-electric grid in 20 years and think that oil will be in demand forever, including the entire oil industry, so they’re in there buying. And #4, the Saudis have held back with production increases to push the price up, so they’re letting it run so they can sell at a higher price. When they do sell, oil crashes again.
Q: Can we re-watch this presentation?
A: Yes, we post it about 2 hours later on the website so all our people in about 135 countries can access it whenever they like. Just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Q: How often do you have these webinars?
A: Every two weeks, and if you need help accessing it on your account page, email customer support at support@madhedgefundtrader.com.
Q: Is it time to initiate short positions on oil companies?
A: Not yet but keep it in the back of your mind. When some of the super-hot economic data come out after Q2, that may be your short in oil—then we may get into the $70’s a barrel. But not yet, there’s still too much upward momentum.
Q: Do you think we will see the 30-year fix below a 3.00% yield again?
A: Yes, in the next recession, which may be 5 or 10 years off because we’re starting at such a low base.
Q: Regarding copper, EV motors require a ton of copper. Doesn’t that make the metals a BUY?
A: That is true, and why we recommended Freeport McMoRan at $4 a year ago and recommended buying every dip. Each one of these rotor motors on each wheel of a Tesla weighs about 100 lbs—I’ve lifted them. Remember I tore apart a Tesla once just to see what made it tick, and they’re really heavy, and they use a lot of copper, and silver as well. So that has always been the bull market case for copper, as well as the fact that China re-emerged as a major buyer for their industrial buildout. That’s why we had a long in the SPDR S&P Metals and Mining ETF (XME).
Q: Do you foresee a good opportunity to go heavy into margin again?
A: Maybe if we get a decent selloff this summer, but you’ll never get the opportunity we had a year ago when you really wanted to put 100% of your portfolio into 2-year LEAPS. The people who did that made many tens of millions of dollars, which is why I get a free bottle of Bourbon every month. That was a once in 20 years event.
Q: What is your 2021 target for the S&P 500 (SPX)?
A: $4,860. It’s in my strategy letter which I sent out on January 6th, and that is all still posted on the website, click here for it.
Q: How do I renew my subscription with your company, and how do I figure out what I bought?
A: Email customer support at support@madhedgefundtrader.com and they will answer you immediately.
Q: Do you follow the iShares IBoxx High Yield Corporate Bond ETF (HYG)?
A: Yes, that is the high yield junk bond fund, but I have been avoiding long bond plays, as you may have noticed with my screaming short of the past year. We list (HYG) in these slides in the Bonds section.
To watch a replay of this webinar, just log in to www.madhedgefundtrader.com , go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH or TECHNOLOGY LETTER (as the case may be), then WEBINARS, and all the webinars from the last ten years are there in all their glory.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 19, 2021
Fiat Lux
Featured Trade:
(FEBRUARY 17 BIWEEKLY STRATEGY WEBINAR Q&A),
(USO), (XLE), (AMZN), (SPY), (RIOT), (T), (ZM), (ROKU), (TSLA), (NVDA) (TMQ) (TLRY), (ACB), (KO), (XLF), (AAPL) (REMX), (GLD), (SLV), (CPER)
Below please find subscribers’ Q&A for the February 17 Mad Hedge Fund Trader Global Strategy Webinar broadcast from frozen Incline Village, NV.
Q: Are we buying gold on dips?
A: Not yet. As long as you have a ballistic move in bitcoin going on, you don't want to touch gold. Eventually gold does get dragged up by the global bull market in commodities, but silver is more preferable since it moves up at twice the rate of gold in bull markets.
Q: Is it time to buy Amazon (AMZN) LEAPS?
A: Yes, I am looking for a move to $5,000 a share in Amazon with the onset of enormous GDP figures. Exploding consumer spending may be what breaks Amazon out of its current six-month range. I would do something like a two-year LEAP with the $3,600-$3,700 in Amazon. Be cautious and stay near the money. You should get like a 400% or 500% return on that LEAP at expiration, or sooner.
Q: What's your view on Tesla (TSLA)?
A: It looks tired—lower lows, lower highs. We’re in a short-term downtrend that could last several months. I’m holding off on buying Tesla until we find a bottom. I just have one $150 out-of-the-money call spread that expires in 20 days, and that’s it. We paired our position way back on Tesla. Wait for the market to come to you, if you can get Tesla under $700, that's a great time to buy LEAPS on Tesla.
Q: Are you still bearish on energy (XLE)?
A: Short term no, long term yes. You’re trying to catch a rally in a long-term bear market. Some people can do that, some people can’t. It’s the next buggy whip industry, the next American Leather, which completely vaporized.
Q: What about the calls for $100 oil (USO)?
A: Yes, after the markets went up $10 dollars in a day you always see calls for $100 oil. If the energy crisis in Texas shows us anything, it’s that we have to move away from oil as an energy source much faster than we thought because its distribution and production system freeze.
Q: Are you expecting a short-term correction (SPY)?
A: Yes but no more than 4%; there is still too much cash on the sidelines.
Q: Have airline leisure stocks run too far?
A: No, they are coming off of much lower lows so they can go to much higher highs. Almost all restrictions should be gone in six months—I’m trying to time my Australia trips and I think in six months may get to the point where, if you show proof of vaccination and submit to a 3 day test, they will let you into the country. But in six months you won’t be able to get an airline or hotel reservation.
Q: What about the AT&T (T) yield play and 5G play?
A: Yes, I still like AT&T and you should probably buy it about here. All these legacy telecom companies are going to have big moves once 5G accelerates allowing a vast expansion of streaming and other high-end services.
Q: Is CRISPR (CRSP) a good LEAP candidate?
A: Yes, and you can do something like the $200-$210 two years out because it’ll almost certainly get taken over before then.
Q: What’s a good LEAP for Tesla?
A: Wait for it to drop to $700 first and then buy something like the $900-$1000 two years out.
Q: What do you think of Apple?
A: Apple (AAPL) is taking a rest waiting for the 5G rollout to reaccelerate. Our target for Apple this year is $200.
Q: Do we sell in May and go away?
A: I would just go away and keep all your longs. The trouble is, trying to be ultra-smart and time all this stuff in a runaway bull market, you find it a lot harder to get in when you come back; you go “oh my gosh these things are up so much,” you don’t buy anything, and then it doubles. I’ve seen that a lot in the past, New York in 1971, Tokyo in 1987, Dotcom stocks in 1985, add US stocks in 2015.
Q: What do you think of Riot (RIOT) stock?
A: Wouldn't touch it with a ten-foot pole. If I didn’t want to buy bitcoin at $1, I'm not going to want to buy it at $51,000. Go elsewhere for your bitcoin advice, except you’ll hear the same thing: it will go up because it’s gone up. You should use it as a risk indicator. That’s essentially what all bitcoin analysts will tell you because there's nothing to analyze. There are no earnings, there's not even any physical presence anywhere to analyze, no customer support. If you can get seven 10 baggers like we did last year, with Zoom (ZM), Roku (ROKU), Tesla (TSLA), and Nvidia (NVDA) —why bother with cryptocurrencies?
Q: What are your thoughts on travel?
A: My take is that leisure travel is returning in mass but that the business travelers will shy away; and that will be true for this year but probably not next year. I think business travel will come back once it’s 100% safe and once all the companies are making money again and can afford travel.
Q: Is Trilogy Metals Inc. (TMQ) a good buy? It has Copper, Zinc, and some exposure to Gold and Silver.
A: Yes, it is a buy. Most commodity prices should double from these levels; and probably the smartest ones to buy are the ones that haven't moved yet—gold and silver, but silver especially. The world will come roaring back and it needs every possible metal it can get its hands on.
Q: What do you think of the cannabis stocks (TLRY), (ACB)?
A: That is one of several small bubbles in the markets that I don't want to touch at all. How hard is it to grow a weed? Barriers to entry are zero. Massive competition from the black market, as about 30% of the cannabis demand is still going to your local drug dealer who doesn’t have to pay taxes, whereas you get double taxed with a pot company—35% retail sales taxes and then taxes on the profits on top of that. So no thank you, Mary Jane.
Q: Do you think Warren Buffet is still the leading thought contributor to personal finance, or is he outdated?
A: Berkshire Hathaway is up 10% this year, and the Dow is up only 2.8%, so I would say he’s still pretty well in touch with the markets; and he has very heavy weightings in Coca Cola (KO), Financials (XLF), and Apple (AAPL), as well as some energy stocks. Good discipline and good strategy never go out of style.
Q: Is the Texas energy disaster going to set the US’ way on renewable energy faster?
A: Yes, it does force people to consider the move into alternative energy sources much faster, especially when the old energy sources go to zero and then have whole states lose their power sources. Look how the governor of Texas is blaming frozen windmills, which only account for 7% of the Texas energy supply. What a joke! I’ll lend him my hairdryer and they’ll work. Notice the propensity to immediately blame others for their own mistakes. That is terrible leadership. Texas is going to turn blue.
Q: Is climate change overhyped in the US stock market?
A: Absolutely yes, that’s why I haven’t been buying any of these. They tend to be smaller companies, and ever since Biden got the lead in the primaries and the polls last spring this whole sector, and ESG investing in general, has been on an absolute tear and is wildly expensive. I call these feel-good stocks; people buy them because they make them feel good but very few of these actually make real money. I prefer to stick to the real money plays of which there are more than enough around.
Q: Do you like rare earth such as the Van Eck Vectors Rare Earth/Strategic Metals ETF (REMX)?
A: I do like rare earths. You need them for practically anything electronic. China's been withholding supplies again, which they like to do from time to time just to rattle our cage because we need them for all our weapons systems. But this is also prone to bubbles, so be careful when you buy it that you’re not paying up too much. By the way, the (REMX) ETF was brought out at the absolute peak of the last rare earth bubble, which we covered extensively 11 years ago. We got people in at the very bottom of rare earth, and things went up ten times. Then we got everybody out and people said I was being bearish too soon, so I never got invited to conferences again. After that, it went down for eight straight years.
Q: Don’t you think frozen windmills and solar speak for more reliance on oil than less? Biden administration limits on oil will drive up prices.
A: You’re right on the second part; creating shortage of supply will cause price increases. But frozen windmills are a result of lack of capital investment and planning. It turns out all of the windmills in the northern part of the US have electric heaters, so they don’t freeze because it gets colder up there. They didn’t do that in Texas to save money, and now they have lost about 7% of the total Texas energy supply. So bad management was the issue there. Penny-wise and pound-foolish.
Q: Are commodities in general in play? What is the best ETF for commodities?
A: The trouble with commodities is there is no one big catch all commodity ETF. However, you can expect one soon; as things peak or have big runs, they tend to generate new ETFs like new children because the demand is there. In the commodities world, there are lots of individual 1x and 2x ETFs like the gold ETF (GLD), the silver (SLV), the copper (CPER), and so on. But there isn’t one good basket I’ve found. You can always create your own by buying small amounts of each of the leading companies, which is probably the best thing to do.
Q: What is the best property value right now?
A: That would be Mississippi; they have the lowest housing prices in the United States. Unfortunately, low cost of living, low tax states also have the worst education systems, which doesn’t matter of course if you don't have kids. In the end, you get what you pay for. It’s OK if you don’t mind dealing with stupid people every day, which I do. I can always tell when I’m dealing with customer support in the deep south because literacy falls off a cliff.
Q: Should we get a 10% correction soon?
A: Probably not; the last 10% correction needed a presidential election to scare the daylights out of you, and there's nothing like that on the horizon now. Maybe we’ll get another 5% correction on a game stop type incident, but there's just too many people trying to get into the stock market now. People who were selling last March/April are the same people who are buying now.
Q: Is there a bright future for hydrogen?
A: No, electricity is infinitely scalable, and hydrogen isn’t. It’s about as scalable as gasoline because you have to move it around in big tankers, keep it at 434.5 degrees Fahrenheit below zero, which is very expensive and has an unfortunate tendency to blow up. So, I never bought into the hydrogen thesis, except for local use of fleets where everyone gets all their hydrogen from a central facility.
Q: What will be the best performing sector in the next 1-3 months?
A: Your bond short and your financials. It’s the same trade. And it’s the one sector that no one asked about today.
Q: Do you think bitcoin is a bubble poised to pop at some point?
A: Yes, but who knows where that is; bubble tops are impossible to predict, especially when there are no valuation metrics. Bottoms can be measured with valuation metrics, but tops can’t because greed is an immeasurable quantity. However, it will certainly pop when they suddenly decide to increase the total outstanding number of bitcoins, which may seem unlikely now but is inevitable.
Good Luck and Stay Healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 16, 2021
Fiat Lux
Featured Trade:
(MARKET OUTLOOK FOR THE WEEK AHEAD, or A RETURN TO IRRATIONAL EXHUBERANCE)
(PLBY), (SPX), ($INDU), (NVDA), (AMD), (MU), (USO)
Playboy is going public.
Its flagship magazine was wiped out by free internet porn last year after a storied 66-year run. During the 1970s, an invitation to a new club opening was the hottest ticket in town.
Of course, I bought the magazine only to read the articles.
Melania Trump as a centerfold? The business possibilities boggle the mind. Of course, it’s going public through a SPAC. Nobody else would touch this with a ten-foot pole. The ticker symbol will be (PLBY).
What this IPO does tell me is how overheated the markets are getting. In 1996, former Fed governor, saxophone player, and Ayn Rand acolyte, the gnomish Alan Greenspan warned the stock market of “irrational exuberance.” Since then, the Dow Average has risen by 5.2 times in 23 years, revisiting the 6,000 low once in 2009.
In fact, let me explain to you why stocks are so cheap.
At the 2000 Dotcom Bubble top, ten-year US Treasury yields stood at 6%. Stocks would have to rise five times more from today’s paltry 1.20% to reach the same relative valuation.
Dow 163,000 anyone?
Similarly, the big FANG stocks would have to triple in value to get us to the 100X price earnings multiple that prevailed in 2000. That gets us at least to Dow 94,500.
And this is what people don’t get about liquidity-driven bull markets. They go on far, far longer than anyone imagines possible. You had to be in Tokyo in 1989 to understand this.
If you’re really and truly worried about stocks, take a look at the chart below and how they reacted to the last catastrophic selloff that took place during 2007-2009.
After an initial, frenetic move, they rose by, you guessed it, 5.2 times.
The Global Chip Shortage is spreading beyond cars to phones and electronics. High prices beckon across the board. Could this be the black swan that heads off the recovery? It’s all a screaming BUY for (NVDA), (AMD), and (MU). I can’t believe these haven’t moved yet.
Biden created a Bull Market in Oil (USO) when he banned new leases on federal lands. The move took 3 million barrels a day off the market, taking a bite out of the 10 million barrels a day oversupply. And economic recovery should soak up the remaining 7 million barrels, 2021 forecasts for Texas tea are now reaching as high as $80.
Space X is taking pre-orders for Starlink, Elon Musk’s Global satellite WIFI network. Another industry disrupted. For a $99 deposit, you can access 500 megabytes a second, faster than available for most of the US. The goal is to launch 11,943 satellites by 2024. If it works, AT&T (T), Comcast (CMCSA), and Verizon (V) could be in big trouble. When you own your own rocket company, it’s easy to undercut the competition.
Weekly Jobless Claims are still weak, at 793,000, far higher than expected, but less than last week. Total jobless claims have it an unbelievable 20.44 million, just short of the 1930’s Great Depression high. Perhaps 20% of the country is living on government handouts.
The Pandemic Property Boom continues, posting the hottest numbers since 2005. The National Association of Realtors says the price of a single-family home rose by a staggering 14.9% in Q4. The Northeast was the leader at a 21% gain. The market keeps going from strength to strength.
Will the Dow double in a year? We only have 4,500 points to go for a 100% gain from the last March 20 low. We have already seen the sharpest gain in history, beginning when Biden took the lead in the primaries. Will passage of the $1.9 trillion rescue package take us over the finish line? And are we setting up for a “Buy the rumor, sell the news? We’ll know in a month. I bet you’ve just made more money in stocks than you’ve ever imagined possible. Take short-term profits in everything.
Bonds hit new lows, taking the ten-year US Treasury yield up to 1.20%. The Feds hit the markets for a massive $120 million in debt this week and buyers are obviously glutted. Keep selling those rallies in the (TLT). Maybe you should start selling dips, too. Use bond selloffs for your stock market timing. They’re about to become “certificates of confiscation” again.
No hint of rising rates soon, hints Fed governor Jay Powell. Recovery is the only goal, damn the inflation torpedoes.
When we come out the other side of pandemic, we will be perfectly poised to launch into my new American Golden Age, or the next Roaring Twenties. With interest rates still at zero, oil cheap, there will be no reason not to. The Dow Average will rise by 400% to 120,000 or more in the coming decade. The American coming out the other side of the pandemic will be far more efficient and profitable than the old. Dow 120,000 here we come!
My Mad Hedge Global Trading Dispatch earned an amazing 16.48% so far in February after a blockbuster 10.21% in January. The Dow Average is up a trifling 2.80% so far in 2021.
This is my fourth double-digit month in a row. My 2021 year-to-date performance soared to 26.69%. There are only four trading days left until the February 19 option expiration, when I automatically go into 80% cash. That’s convenient!
That brings my 11-year total return to 449.24%, some 2.04 times the S&P 500 (SPX) over the same period. My 11-year average annualized return now stands at an Everest-like new high of 40.29%.
My trailing one-year return exploded to 90.96%, the highest in the 13-year history of the Mad Hedge Fund Trader. We have earned 108.63% since the March 20, 2020 low.
We need to keep an eye on the number of US Coronavirus cases at 27.7 million and deaths approaching 500,000, which you can find here. We are now running at a heartbreaking 3,000 deaths a day. But that is down 35% from the recent high.
The coming week will be a boring one on the data front.
On Monday, February 15, markets are closed for Presidents Day.
On Tuesday, February 16 at 8:30 AM EST, the NY Empire State Manufacturing Index is out. CVS (CVS) and Zoetis report.
On Wednesday, February 17 at 8:30 AM, US Retail Sales for January are published. At 2;00 PM, we learn the Fed Open Market Committee minutes from the last meeting. Shopify and Twilio report.
On Thursday, February 18 at 9:30 AM, Weekly Jobless Claims are printed. Barrick Gold (GOLD) and Roku (ROKU) report.
On Friday, February 19 at 10:00 AM, Existing Home Sales for January are released. We learn the Baker-Hughes Rig Count. As we have a three-day weekend following, option volatility should collapse. John Deere (DE) reports.
As for me, let me tell you what the last weeks of the great Japanese bull market were like at the end of 1989.
The big thing then was to eat sushi salted with flecks of pure gold. Any foreigner who could speak Japanese was worth hundreds of thousands of dollars a year.
The brokers would hire anyone. Kids went from running sandwich shops to trading desks at Morgan Stanley. Others upgraded from bicycles to Porsche Carrera’s and used to race on Tokyo’s abandoned freeway system in the middle of the night.
And you know what? Someone offered me a piece of gold-flecked sushi just the other day!
Stay healthy.
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
January 22, 2021
Fiat Lux
Featured Trade:
(JANUARY 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(QQQ), (IWM), (SPY), (ROM), (BRK/A), (AMZN), NVDA), (MU), (AMD), (UNG), (USO), (SLV), (GLD), ($SOX), CHIX), (BIDU), (BABA), (NFLX), (CHIX), ($INDU), (SPY), (TLT)
