($VIX) Archives - Page 7 of 34 - Mad Hedge Fund Trader

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Short Selling School 101

With the market now scraping the absolute top of the 2023 trading range, it’s time to revisit Short Selling School.

We are also solidly into the high-risk, low-return time of the year from May to November. Historically, the total return for the time of year or the past 70 years is precisely zero.

I, therefore, think it is timely to review how to make money when prices are falling. I call it Short Selling School 101

There is nothing worse than closing the barn door after the horses have bolted or hedging after markets have crashed.

No doubt, you will receive a wealth of short selling and hedging ideas from your other research sources and the media right at the next market bottom.

That is always how it seems to play out.

So I am going to get you out ahead of the curve, putting you through a refresher course on how to best trade falling markets now, while stock prices are still rich.

Markets could be down 10% or more by the time this is all over.

There is nothing worse than fumbling around in the dark looking for the matches and candles after a storm has knocked the power out.

I’m not saying that you should sell short the market right here. But there will come a time when you will need to do so.

Watch my Trade Alerts for the best market timing. So here are the best ways to profit from declining stock prices, broken down by security type:

Bear ETFs

Of course the granddaddy of them all is the ProShares Short S&P 500 Fund (SH), a non-leveraged bear ETF that is supposed to match the fall in the S&P 500 point for point on the downside. Hence, a 10% decline in the (SPY) is supposed to generate a 10% gain in the (SH).

In actual practice, it doesn’t work out like that. The ITF has to pay management operating fees and expenses, which can be substantial. After all, nobody works for free.

There is also the “cost of carry,” whereby owners have to pay the price for borrowing and selling short shares. They are also liable for paying the quarterly dividends for the shares they have borrowed, around 2% a year. And then you have to pay the commissions and spread for buying the ETF.

Still, individuals can protect themselves from downside exposure in their core portfolios through buying the (SH) against it (click here for the prospectus). Short selling is not cheap. But it’s better than watching your gains of the past seven years go up in smoke.

Virtually all equity indexes now have bear ETFs. Some of the favorites include the (PSQ), a short play on the NASDAQ (click here for the prospectus), and the (DOG), which profits from a plunging Dow Average (click here for the prospectus).

My favorite is the (RWM), a short play on the Russell 2000, which falls 1.5X faster than the big cap indexes in bear markets (click here for the prospectus).

Leveraged Bear ETFs

My favorite is the ProShares UltraShort S&P 500 (SDS), a 2X leveraged ETF (click here for the prospectus). A 10% decline in the (SPY) generates a 20% profit, maybe.

Keep in mind that by shorting double the market, you are liable for double the cost of shorting, which can total 5% a year or more. This shows up over time in the tracking error against the underlying index. Therefore, you should date, not marry this ETF, or you might be disappointed.

3X Leveraged Bear ETF

The 3X bear ETFs, like the UltraPro Short S&P 500 (SPXU), are to be avoided like the plague (click here for the prospectus).

First, you have to be pretty good to cover the 8% cost of carry embedded in this fund. They also reset the amount of index they are short at the end of each day, creating an enormous tracking error.

Eventually, they all go to zero and have to be periodically redenominated to keep from doing so. Dealing spreads can be very wide, further adding to costs.

Yes, I know the charts can be tempting. Leave these for the professional hedge fund intraday traders for which they are meant.

Buying Put Options

For a small amount of capital you can buy a ton of downside protection. For example, the April (SPY) $182 puts I bought for $4,872 on Thursday allows me to sell short $145,600 worth of large cap stocks at $182 (8 X 100 X $6.09).

Go for distant maturities out several months to minimize time decay and damp down daily price volatility. Your market timing better be good with these because when the market goes against you, put options can go poof and disappear pretty quickly.

That’s why you read this newsletter.

Selling Call Options

One of the lowest risk ways to coin it in a market heading south is to engage in “buy writes.” This involves selling short call options against stock you already own but may not want to sell for tax or other reasons.

If the market goes sideways or falls, and the options expire worthless, then the average cost of your shares is effectively lowered. If the shares rise substantially they get called away, but at a higher price so you make more money. Then you just buy them back on the next dip. It is a win-win-win.

Selling Futures

This is what the pros do, as futures contracts trade on countless exchanges around the world for every conceivable stock index or commodity. It is easy to hedge out all of the risk for an entire portfolio of shares by simply selling short futures contracts for a stock index.

For example, let’s say you have a portfolio of predominantly large cap stocks worth $100,000. If you sell short 1 June, 2016 contract for the S&P 500 against it, you will eliminate most of the potential losses for your portfolio in a falling market.

The margin requirement for one contract is only $5,000. However, if you are short the futures and the market rises, then you have a big problem, and the losses can prove ruinous.

But most individuals are not set up to trade futures. The educational, financial, and disclosure requirements are beyond mom-and-pop investing for their retirement fund.

Most 401Ks and IRAs don’t permit the inclusion of futures contracts. Only 25% of the readers of this letter trade the futures market. Regulators do whatever they can to keep the uninitiated and untrained away from this instrument.

That said, get the futures markets right, and it is the quickest way to make a fortune if your market direction is correct.

Buying Volatility

Volatility (VIX) is a mathematical construct derived from how much the S&P 500 moves over the next 30 days. You can gain exposure to it through buying the iPath S&P 500 VIX Short-Term Futures ETN (VXX) or buying call and put options on the (VIX) itself.

If markets fall, volatility rises, and if markets rise, then volatility falls. You can therefore protect a stock portfolio from losses through buying the (VIX).

I have written endlessly about the (VIX) and its implications over the years. For my latest in-depth piece with all the bells and whistles, please read “Buy Flood Insurance With the (VIX)” by clicking here.

Selling Short IPOs

Another way to make money in a down market is to sell short recent initial public offerings. These tend to go down much faster than the main market. That’s because many are held by hot hands, known as “flippers,” don’t have a broad institutional shareholder base.

Many of the recent ones don’t make money and are based on an, as yet, unproven business model. These are the ones that take the biggest hits.

Individual IPO stocks can be tough to follow to sell short. But one ETF has done the heavy lifting for you. This is the Renaissance IPO ETF (click here for the prospectus). So far, a 6% drop in the main indexes has generated a 20% fall in (IPO).

Buying Momentum

This is another mathematical creation based on the number of rising days over falling days. Rising markets bring increasing momentum while falling markets produce falling momentum.

So, selling short momentum produces additional protection during the early stages of a bear market. Blackrock issued a tailor-made ETF to capture just this kind of move through its iShares MSCI Momentum Factor ETF (MTUM). To learn more, please read the prospectus by clicking here.

Buying Beta

Beta, or the magnitude of share price movements, also declines in down markets. So, selling short beta provides yet another form of indirect insurance. The PowerShares S&P 500 High Beta Portfolio ETF (SPHB) is another niche product that captures this relationship.

The Index is compiled, maintained, and calculated by Standard & Poor's and consists of the 100 stocks from the (SPX) with the highest sensitivity to market movements, or beta, over the past 12 months.

The Fund and the Index are rebalanced and reconstituted quarterly in February, May, August, and November. To learn more, read the prospectus by clicking here.

Buying Bearish Hedge Funds

Another subsector that does well in plunging markets is publicly listed bearish hedge funds. There are a couple of these that are publicly listed and have already started to move.

One is the Advisor Shares Active Bear ETF (HDGE) (click here for the prospectus). Keep in mind that this is an actively managed fund, not an index or mathematical relationship, so the volatility could be large.

Oops, Forgot to Hedge

May 22, 2023

Diary, Newsletter, Summary

Global Market Comments
May 22, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or CONCENTRATION OF WEALTH AT THE TOP)
(AAPL), (GOOGL), (AMZN), (MSFT), (NVDA), (TSLA), ($VIX), (JPM), (BAC), (C)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or Concentration of Wealth at the Top

Diary, Free Research, Newsletter

As I write this to you, I am flying at 30,000 feet over the red clay of Georgia. The azure blue of the Gulf of Mexico is on the left and the Golden State of California lies straight ahead.

I am returning from a five-day whirlwind tour of Florida, which saw me speak at three Strategy Luncheons and countless private meetings.

It was a blast!

Not only did I learn the local lay of the land, I often pick up some great trading ideas.

I first hitchhiked across the Sunshine State in 1967. Except for a few small towns on the coasts, there was nobody there. The entire inland of the state was covered with small cattle ranches and the odd tourist trap (mermaids, alligator wrestling, snake shows etc).

People thought the extensive freeway system was only built because the state was just 90 miles away from Cuba, then a Cold War flash point (it is officially called the “Dwight D. Eisenhower National System of Interstate and Defense”). Suddenly, somebody secretly started buying up land around Orlando. The locals thought General Motors (GM) was going to build a car plant there.

Then Walt Disney Corp (DIS) swept in and announced they were building a second Disneyland to cater to the east coast, creating an astonishing 70,000 jobs and the freeways started to fill up (click here for the video).

Today, driving around the state is a dystopian nightmare. The US population has doubled since the first Interstates were built in the 1950s, and the US GDP has increased by ten times, a byproduct of the Interstates. That means ten times more heavy truck traffic which has been mercilessly beating the life out of the roads. In Florida, the population has risen by more than fourfold as well, from 5 million to 22.2 million so you get the picture.

You lurch from one traffic jam to the next, even in the middle of the night. Whatever time Google Maps says it will take to get somewhere, triple it. The only consolation is that the traffic is worse in California.

I loved Key West where a very happy Concierge member made available an 1859 mansion close to the waterfront, restored and modernized down to the studs. By this time of the year, anyone with money has decamped for New England leaving only the retirees and beach bums.

I made the pilgrimage to Earnest Hemmingway’s home where he produced 70% of his published writings in only seven years. Another two boxes of manuscripts were discovered in the basement of his favorite bar last year.

It’s ironic that this state is now known for banning books that include sex and violence. Steinbeck’s work has already hit the dustbin, so old Earnest can’t be far behind.

What’s next? The Bible? It has lots of sex and violence.

As for me, Hemingway’s granddaughter, Mariel, stands out as the only Playboy cover girl I ever dated (April, 1982, I think). She is now happily married with three grown kids.

And yes, I did prove that it is possible to eat Key Lime Pie four days in a row.

As for the stock market last week, there really isn’t much to say. The concentration of wealth at the top continues unabated, as it is in the rest of the country. Stocks are still discounting a soft landing, while commodities, energy, and bonds expect a recession.

Go figure.

The top five stocks continues to suck all the money out of the rest of the market, (AAPL), (GOOGL), (AMZN), (MSFT), and (NVIDIA), the early beneficiaries of AI, accounting for 80% of this year’s market gains. Of the other 495 stocks, 250 are below their 200-day moving averages, meaning they are still in bear markets.

This is what has crushed volatility, taking the ($VIX) from $34 down to $15. The last time volatility was this low was just before the Long Term Capital Management fiasco where it languished around $9 (read Liar’s Poker by my friend Michael Lewis). When LTCB went bust, volatility rocketed to $40 overnight and stayed there for two years.

Options traders made fortunes.

Mad Hedge has nailed every trend this year. We bought tech and Tesla (TSLA) in January when we should have. We shorted ($VIX) every time it approached $30. Then we bought the banking bottom in March (JPM), (BAC), (C) and carried those positions into April.

We’ve been shorting Tesla strangles every month. And now we are 80% in cash waiting for the world to end one more time in Washington DC so we can load the boat with LEAPS and replay the movie one more time.

By the way, Mad Hedge has issued 25 LEAPS over the past year and 24 made money with an average profit of about 300%. Our sole loser has been with Rivian (RIVN), but even it still has 18 months to run. Never own an EV stock during a price war.

So far in May I have managed a modest 2.43% profit. My 2023 year-to-date performance is now at an eye-popping +64.18%. The S&P 500 (SPY) is up only a miniscule +9.00% so far in 2023. My trailing one-year return reached a 15-year high at +113.84% versus +10.87% for the S&P 500.

That brings my 15-year total return to +661.37%. My average annualized return has blasted up to +48.99%, another new high, some 2.74 times the S&P 500 over the same period.

Some 41 of my 44 trades this year have been profitable. My last 22 consecutive trade alerts have been profitable.

I closed out only one trade last week, a long in the (TLT) just short of max profit a day before expiration. That just leaves me with a long in Tesla and a short in Tesla, the “short strangle”. I now have a very rare 80% cash position due to the lack of high return, low risk trades.

There’s a 1,000 Point Drop in the Market Begging to Happen. That’s what happens when the market rallies on a Biden McCarthy debt ceiling deal, which McCarthy’s own party then votes down. After all, it took McCarthy 15 votes to get his job. Just watch volatility, it’s a coming.

Weekly Jobless Claims Fall to 242,000, down from 264,000. It’s a surprise slowdown. The rumor is that last week’s highpoint was the result of a surge in fraudulent online claims in Massachusetts.

NVIDIA Could Rise Fivefold in Ten years, say fund managers. I think that’s a low number. The Silicon Valley company makes the top performing GPU’s in the industry selling up to $60,000 each. (NVDA) is seeing a perfect storm of demand from the convergence of AI and Internet growth. The shares have already tripled off of the October low.

Tesla is Considering an India Factory, as part of its eventual build out to 10 plants worldwide. The country’s 100% import duty on cars has been a major roadblock. India is now pushing a “Made in India” initiative. Good luck getting anything done in India.

Homebuilder Sentiment Up for 10^th Straight Month, as it will be for the next decade. There is no easy escape from a demographic wave. New homebuilders have figured out the new model.

India’s Tata to Build iPhones for Apple, in an accelerating diversification away from China. Apple has had too many of its eggs in one basket, especially given the recent political tensions between the US and the Middle Kingdom.

US Dollar Soars to Three Month High, as investors flee to safe haven short term investments. Rapidly worsening economic data is sparking recession fears. Ten consecutive months of falling inflation is another indicator of a slowdown.

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!

On Monday, May 22 there is nothing of note to report.

On Tuesday, May 23 at 4:00 PM EST, the inaugural launch of Mad Hedge Jacquie’s Post takes place. Please click here to attend this strategy webinar. The Federal Reserve Open Market Committee minutes are out at 2:00 PM.

On Wednesday, May 24 at 2:00 PM, the Federal Reserve Open Market Committee minutes are out.

On Thursday, May 25 at 8:30 AM, the Weekly Jobless Claims are announced. The US GDP Q2 second estimate is also published.

On Friday, May 26 at 2:00 PM, the University of Personal Income & Spending and Durable Goods are released.

As for me, I am reminded of my own summer of 1967, back when I was 15, which may be the subject of a future book and movie.

My family summer vacation that year was on the slopes of Mount Rainier in Washington State. Since it was raining every day, the other kids wanted to go home early.

So my parents left me and my younger brother in the firm hands of Mount Everest veteran Jim Whitaker to summit the 14,411 peak (click here for this story ). The deal was for us to hitchhike back to Los Angeles as soon as we got off the mountain.

In those days, it wasn’t such an unreasonable plan. The Vietnam War was on, and a lot of soldiers were thumbing their way to report to duty. My parents figured that since I was an Eagle Scout, I could take care of myself anywhere.

When we got off the mountain, I looked at the map and saw there was this fascinating-sounding country called “Canada” just to the north. So, it was off to Vancouver. Once there I learned there was a world’s fair going on in Montreal some 2,843 away, so we hit the TransCanada Highway going east.

We ran out of money in Alberta, so we took jobs as ranch hands. There we learned the joys of running down lost cattle on horseback, working all day at a buzz saw, artificially inseminating cows, and eating steak three times a day.

I made friends with the cowboys by reading them their mail, which they were unable to do since they were all illiterate. There were lots of bills due, child support owed, and alimony demands.

In Saskatchewan, the roads ran out of cars, so we hopped a freight train in Manitoba, narrowly missing getting mugged in the rail yard. We camped out in a box car occupied by other rough sorts for three days. There’s nothing like opening the doors and watching the scenery go by with no billboards and the wind blowing through your hair!

When the engineer spotted us on a curve, he stopped the train and invited us to up the engine. There, we slept on the floor, and he even let us take turns driving! That’s how we made it to Ontario, the most mosquito-infested place on the face of the earth.

Our last ride into Montreal offered to let us stay in his boat house as long as we wanted so there we stayed. Thank you, WWII RAF Bomber Command pilot Group Captain John Chenier!

Broke again, we landed jobs at a hamburger stand at Expo 67 in front of the imposing Russian pavilion with the ski jump roof. The pay was $1 an hour and all we could eat.

At the end of the month, Madame Desjardin couldn’t balance her inventory, so she asked how many burgers I was eating a day. I answer 20, and my brother answered 21. “Well, there’s my inventory problem” she replied.

And then there was Suzanne Baribeau, the love of my life. I wonder whatever happened to her?

I had to allow two weeks to hitchhike home in time for school. When we crossed the border at Niagara Falls, we were arrested as draft dodgers as we were too young to have driver’s licenses. It took a long conversation between US Immigration and my dad to convince them we weren’t. It wasn’t the last time my dad had to talk me out of jail.

We developed a system where my parents could keep track of us across the continent. Long-distance calls were then enormously expensive. So, I called home collect and when my dad answered, he asked what city the call was coming from.

When the operator gave him the answer, he said he would NOT accept the call. I remember lots of surprised operators. But the calls were free, and Dad always knew where we were. At least he had a starting point to look for the bodies.

We had to divert around Detroit to avoid the race riots there. We got robbed in North Dakota, where we were in the only car for 50 miles. We made it as far as Seattle with only three days left until high school started.

Finally, my parents had a nervous breakdown. They bought us our first air tickets ever to get back to LA, then quite an investment.

I haven’t stopped traveling since, my tally now tops all 50 states and 135 countries.

And I learned an amazing thing about the United States. Almost everyone in the country is honest, kind, and generous. Virtually every night, our last ride of the day took us home and provided us with an extra bedroom, garage, barn or tool shed to sleep in. The next morning, they fed us a big breakfast and dropped us off at a good spot to catch the next ride.

It was the adventure of a lifetime and I profited enormously from it. As a result, I am a better man.

As for my brother Chris, he died of covid in early 2020 at the age of 65, right at the onset of the pandemic. Unfortunately, he lived very close to the initial Washington State hot spot.

People often ask me what makes me so different from others. I answer, “My parents taught me I could do anything with my life, and I proved them right.”

Good luck and good trading.

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

Summit of Mt. Rainier 1967

McKinnon Ranch Bassano Alberta 1967

American Pavilion Expo 67

Hamburger Stand at Expo 67

Picking Cherries in Michigan 1967

May 8, 2023

Diary, Newsletter, Summary

Global Market Comments
May 8, 2023
Fiat Lux

Featured Trades:

(MARKET OUTLOOK FOR THE WEEK AHEAD,
or THE GOLDEN AGE OF BIG BANKING HAS JUST BEGUN)
(JPM), (FRC), (BAC), (C), (WFC), (AAPL), (GOOGL), (META),
(AMZN), (TSLA), (NVDA), (CRM), ($VIX), (USO), (TLT), (QQQ)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or The Golden Age of Big Banking has Just Begun!

Diary, Newsletter

The United States is about to change beyond all recognition.

Most investors have missed the true meaning of the JP Morgan takeover of First Republic Bank for sofa change, some $10.6 billion. It in fact heralds the golden age of big banking. The US is about to move from 4,000 banks to four, with all of the profits accruing at the top.

Look at the details of the (JPM)/(FRC) deal and you will become utterly convinced.

(JPM) bought a $90 billion loan portfolio for 87 cents on the dollar, despite the fact that the actual default rate was under 1%. The FDIC agreed to split losses for five years on residential losses and seven years on commercial ones. The deal is accretive to (JPM) book value and earnings. (JPM) gets an entire wealth management business, lock, stock, and barrel. Indeed, CEO Jamie Diamond was almost embarrassed by what a great deal he got.

It was the deal of the century, a true gift for the ages. If this is the model going forward, you want to load the boat with every big bank share out there.

And the amazing thing was that (JPM) made the highest bid among a half dozen contenders.

Along with Health Care, banking is the last unconsolidated US industry. We have five railroads, four airlines, three trucking companies, three telephone companies, two cell phone providers….and 4,000 banks?

Other countries get by with much less. England has five major banks, Australia four, and Germany two, one of which goes bankrupt every decade (I’m not naming names). America’s financial system is an anachronism of its federal system where each of the 50 states is treated like a mini country.

The net net of this will be a massive capital drain from the entire country to New York where the big banks are concentrated. Local economies in the Midwest and the South will collapse for lack of funding. The West Coast will be OK with behemoth technology companies spinning off gigantic cash flows.

The other big story here is the dramatic change in the administration’s antitrust policy. Until now, it has opposed every large merger as an undue concentration of economic power. Then suddenly, the second largest bank merger in history took place on a weekend, and there will be more to come.

All it takes is a Twitter run by depositors. Every weekend has become a waiting game for the foreseeable future.

Needless to say, this makes all the big banks a screaming buy. Hoover up every one of the coming dip, including (JPM), (BAC), (C), and (WFC).

Big is beautiful.

To prove I am not perfect, my position in First Republic Bank (FRC) still sits on my broker statement a week after it filed for bankruptcy, dead, moribund, and worthless as if it is some form of punishment. It’s a very small position but it stings nonetheless.

It’s like they want to punish me for leading them astray. They have been copying my trades for ages without paying for them and I hope they took a big one in (FRC).

So far in May, I have managed a modest +0.55% profit. My 2023 year-to-date performance is now at an eye-popping +62.30%. The S&P 500 (SPY) is up only a miniscule +8.40% so far in 2023. My trailing one-year return reached a 15-year high at +120.45% versus -3.67% for the S&P 500.

That brings my 15-year total return to +659.49%. My average annualized return has blasted up to +48.86%, another new high, some 2.79 times the S&P 500 over the same period.

Some 40 of my 43 trades this year have been profitable. My last 20 consecutive trade alerts have been profitable.

I initiated no new trades last week, content to run off existing profitable ones. With the Volatility Index at a two-year low at 15.78%, opportunities are few and far between. Those include both longs and shorts in Tesla (TSLA), a long in the bond market (TLT), and a short in the (QQQ).

That leaves me with only one remaining position, a short-dated long in the bond market. I now have a very rare 90% cash position due to the lack of high-return, low-risk trades.

The Fed Raises Rates 0.25%, likely the last such move in this cycle. Futures markets are now discounting a 25-basis point CUT by September, the beginning of a new decade-long falling rate cycle. The problem is that AI is creating more jobs than it is destroying, keeping the Fed fixated on the wrong data.

Nonfarm Payroll Jumps by 253,000, another hot number. The headline Unemployment Rate dropped to a half-century low of 3.4%. These figures suggest for rate hikes to come.

The JP Morgan Buys First Republic Bank from the FDIC, for $10.6 billion, thus wiping out the shareholders. It’s a huge win for (JPM), which picked up 87 branches and $90 billion in loans in the wealthiest part of the country, taking the share up $5. What you lost on (FRC) you made pack on (JPM) LEAPS. Live and learn. On to the next trade! The FDIC got out for nearly free, a big win for the government.

Government Default Date Moved Up to June 1, by US Treasury Secretary Janet Yellen, smacking the bond market for three points. The House remains an albatross around the bond market’s debt.

Europe Ekes Out 0.1% Growth in Q1, versus a 1.1% rate for the US. This is despite the drag of the Ukraine War, energy shortages, high inflation, and Brexit. What’s the difference between the US and Europe? We allow immigrants who become customers, while the continent doesn’t.

You Only Need to Buy Seven Stocks This Year, as the rest are going nowhere. That include (AAPL), (GOOGL), (META), (AMZN), (TSLA), (NVDA), (CRM). Watch out when the next rotation broadens out to the rest of the market.

Is Volatility Bottoming Now? The Fed announcement of a 25 basis point hike on Wednesday could end the move up in stocks. After that, shares will only have an imminent debt default and US government downgrade to focus on. ($VIX) seven-week fade will end that revisit the old highs in the high $20’s. Great shorting opportunities are setting up.

Oil (USO) Crashes 5% on US debt default fears in the biggest drop since January. This is the worst asset class to own going into a recession. EV competition is also starting to take a bite. No gas needed here. $66 a barrel here we come.

More Tesla Price Cuts to Come, with swelling inventories forcing Musk’s hand. The only consolation is that Detroit will suffer more. Musk is cutting profits while the big three are accelerating losses. Tesla has excess inventory for the first time in its 20-year history.

Apple (AAPL) Earnings Beat, led by stronger than expected Q1 iPhone sales at $53.1 billion. EPS came in at $1.53 versus $1.42 expected, revenues at $94.84 billion versus $92.96. Mac and iPad sales are down YOY. Services rose 5.3%. Apple bought back a stunning $90 billion of its own shares and paid dividends. The shares popped $3. The long-term growth play here is low prices phone in India where second hand phone sales have been burgeoning. That's why Apple is now offering to buy your old phone. Next stop: New Delhi.

My Ten-Year View

On Monday, May 8 at 7:30 AM EST, the Consumer Inflation Expectations are out.

On Tuesday, May 9 at 6:00 AM, the NFIB Business Optimism Index is announced.

On Wednesday, May 10 at 11:00 AM, the US Inflation rate is printed.

On Thursday, May 11 at 8:30 AM, the Weekly Jobless Claims are announced. We also get the Producer Price Index.

On Friday, May 12 at 8:30, the University of Michigan Consumer Sentiment Index for April is released.

As for me, I have been going down memory lane looking at my old travel photos looking for new story ideas and I hit the jackpot.

Most people collect postcards from their foreign travels. I collect lifetime bans from whole countries.

During the 1970s, The Economist magazine of London sent me to investigate the remote country of Nauru, one half degree south of the equator in the middle of the Pacific Ocean.

At the time, they had the world’s highest per capita income due to the fact that the island was entirely composed of valuable bird guano essential for agriculture. Before the Haber-Bosch Process to convert nitrogen into ammonia was discovered, guano was the world’s sole source of high grade fertilizer.

So I packed my camera, extra sunglasses, and a couple of pairs of shorts and headed for the most obscure part of the world. That involved catching Japan Airlines from Tokyo to Hawaii, Air Micronesia to Majuro in the Marshall Islands, and Air Nauru to the island nation in question.

There was a problem in Nauru. Calculating the market value of the bird crap leaving the island, I realized it in no way matched the national budget. It should have since the government owned the guano mines.

Whenever numbers don’t match up, I get interested.

I managed to wrangle an interview with the president of the country in the capital city of Demigomodu. It turns out that was no big deal as visitors were so rare in the least visited country in the world that he met with everyone!

When the president ducked out to take a call, I managed to steal a top-secret copy of the national budget. I took it back to my hotel and read it with great interest.

I discovered that the president’s wife had been commandeering Boeing 727s from Air Nauru to go on lavish shopping expeditions to Sydney, Australia where she was blowing $200,000 a day on jewelry, designer clothes, and purses, all at government expense. Just when I finished reading, there was a heavy knock on the door. The police had come to arrest me.

It didn’t take long for missing budget to be found. I was put on trial, sentenced to death for espionage, and locked up to await my fate. The trial took 20 minutes.

Then one morning I was awoken by the rattling of keys. My editor at The Economist, the late Peter Martin, had made a call and threatened the intervention of the British government. Visions of Her Majesty’s Navy loomed on the horizon.

I was put in handcuffs and placed on the next plane out of the country, a non-stop for Brisbane Australia. When I was seated next to an Australian passenger, he asked “Jees, what did you do mate, kill someone?” On arrival, I sent the story to the Australian papers.

I dined out on that story for years.

Alas, things have not gone well for Nauru in the intervening 50 years. The guano is all gone, mined to exhaustion. It is often cited as an environmental disaster. The population has rocketed from 4,000 to 10,000. Per capita incomes have plunged from $60,000 a year to $10,000. The country is now a ward of the Australian government to keep the Chinese from taking it over.

If you want to learn more about Nauru, which many believe to be a fictitious country, please click here.

As for me, I think I’ll pass. I don’t ever plan to visit Nauru again. Once lucky, twice forewarned.

Stay healthy,

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

February 10, 2023

Diary, Newsletter, Summary

Global Market Comments
February 10, 2023
Fiat Lux

Featured Trade:

(FEBRUARY 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(RCL), (TSLA), (UUP), ($VIX), (BRKB), (TLT), (TBT), (ROM), (CVNA), (SLV), (DIS)

CLICK HERE to download today's position sheet.

NOTE TO SUBSCRIBERS: There will be no strategy letter for
February 13 and 21 as I will be traveling. - JT

February 8 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the February 8 Mad Hedge Fund Trader Global Strategy Webinar broadcast from Silicon Valley in California.

Q: What do you make of the Chinese balloon that crossed the United States last week?

It was the most overhyped, least consequential event in recent memory, and is not a new thing. There is no chance this was an innocent scientific mission as there was no flight plan filed. What’s China’s new frontline weapon? A catapult? A bow and arrow? Are American balloon makers going to demand increased defense spending? Curiously, no mention was ever made of the three Chinese balloons that crossed the US during the previous administration when no action was taken. My guess is that a Chinese Army faction wanted to keep their defense spending rising and torpedoed any rapprochement that was in the works with the US. Another theory was that they wanted to test our response. There is nothing the balloon could have captured that the Chinese didn’t already have from their satellites or even Google Earth for free. The media coverage has been a flood of false information. If the Chinese really can predict global winds at 60,000 feet two weeks in advance, then their math is so far more advanced than our own then we might as well surrender. By the way, during WWII the Japanese sent 20,000 balloons our way in an attempt to set the Western US on fire. Only one exploded, killing a family in Oregon.

Q: I’m getting worried about my long-term LEAPS in (TLT) and (FCX) given the recent market action. Thanks in advance for your help.

A: The (TLT)'s should be OK by expiration because they hit max profit even in an unchanged bond market. But Republican radicals who want a government shutdown at any price are definitely going to rattle your cage. That’s why I currently have no short-term position in bonds and am waiting for a bigger pullback to maybe $101 before I get back in. As for Freeport McMoRan (FCX) you can take profits any time. The stock doubled after we recommended the LEAPS in October. Longer term, I think (FCX) goes to $100 because of a coming global copper shortage.

Q: Should I buy Royal Caribbean (RCL) because we’re looking at a record-breaking cruise season coming up this year?

A: The time to buy Royal Caribbean was actually last June; it was one of the first outperformers in the market, completely skipped the October meltdown, and is practically doubled off the low. So great idea, just 8 months too late. And that actually is the case with a lot of stocks now—they've had such enormous runs over a short time, that you’re taking a lot of risks to get involved here.

Q: Do you think Silicon Valley should force all workers back into the office? Wouldn't that enhance creativity?

A: It does enhance creativity but at the cost of productivity. People are much more productive when they work at home, don’t have to spend 2 hours commuting, and can build their job around their lifestyle. They work at home cheaper too. So, it’s a trade-off, do you want creativity or do you want productivity? Well, the productive people should stay at home, the creative people should go to the office—it’s a company by company, product by product decision.

Q: You say you never touch 2x and 3x ETFs?

A: The only exception to that is the ProShares UltraShort 20+ Year Treasury ETF (TBT) which we traded for 2.5 years while the bonds were making a straight line move down, or the ProShares Ultra Technology ETF (ROM) which tends to have straight up move like this year. And the only time you could do a 2x is if you think the move in the underlying is going to be so enormous it covers up all the costs of dealing in these ETFs, then it’s worth doing. 3xs I never ever touch them because those reset at the end of the day and are really designed to be intraday hedging instruments, which we’re not interested in.

Q: Are you still bearish on the US dollar (UUP)?

A: Absolutely, we’ve had almost a straight line move down ever since October, and we’re getting a temporary break on that while interest rates stay higher for longer. The next dive in interest rates, the dollar collapses once again.

Q: When you buy back into bonds, where in the curve will you be buying?

A: In bull markets, you always want to buy the longest maturity available. Back in the 1970s, I used to buy WWI infinite British Treasury bonds because they had 100-year maturities, and therefore, in any bull market, have the largest gains. In the US, the 30-year instruments are pretty illiquid, so I focus on the 10-year, which is the iShares 20 Plus Year Treasury Bond ETF (TLT).

Q: What could be the next entry point for Tesla (TSLA) LEAPS?

A: I’m afraid that we have left LEAPS land for Tesla, I mean $100, $110, $120, $130—that’s all LEAP territory. Up here? Not unless you want to do a very low return LEAP like a $150/$160. I don’t see Tesla going below $150. Too many people trying to get into the stock, and Elon Musk is a master at delivering short squeezes, which he has done a perfect job of this year.

Q: What do you think about Real Estate Investment Trusts (REITS)?

A: I love REITS. They are a falling interest rate play. Highly exposed to interest rates, highly leveraged, and you get some great performance—and we’ve already had some since October. I think the bear market in real estate ends this year and we get a new bull in housing that starts next year because we still have a chronic structural shortage of housing. We’re missing about 10 million houses that we need—in that situation, prices go up. In fact, there are still bidding wars going on in the prime residential (mostly rural) parts of the country.

Q: Wouldn’t you want to buy at-the-money calls, not spreads in a low Volatility Index ($VIX) market on a 4-6 month view, because of cheaper pricing?

A: Yes you do, but not on top of a record move to the upside. If we can get a pullback in the markets of a1 /3-1/2 of their recent moves, and the ($VIX) is still low, then that makes all the sense in the world, to buy at the money calls with ($VIX) of $17. The only problem is if we give up half the recent gains, you’re not going to have a ($VIX) at $17 anymore, it’ll be more like $27 if we get a pullback like that and options will be expensive again. It’s amazing how cheap upside exposure gets at market tops—that’s what the ($VIX) market is telling you. In other words, it’s a sucker’s bet. You can’t have your cake and eat it too.

Q: What do you think about Alphabet (GOOGL)?

A: It’s overbought like the rest of the stocks in the sector. But the charts are looking very attractive, with an upside breakout of the 200-day. Long-term, they have a killer business model, but they also have antitrust problems. Again, everything is way too overbought for me to get involved on a short-term basis.

Q: What price would you get in at for Berkshire Hathaway (BRK/B)?

A: It’s not selling off, it’s flatlining. So even a small dip like we had yesterday would be a decent place to get into. Long term we’re looking for $400/share for this by the end of this year.

Q: Will strong wage growth lead the Fed to raise interest rates higher?

A: Well they’ve already said essentially they’re going to do 2 more quarter point rises. Beyond that, the Fed itself doesn’t know. When you have interest rates at 10-20 year highs, and 3.4% unemployment. No one has ever seen that before, there is no playbook for what’s happening now—either in the economy or in the stock market. So everyone’s standing around, scratching their heads, trying to figure out what to do, and waiting for more data to come out to give direction. And I’m in the same position really.

Q: Will the US Treasury bond get down to a 2.0% yield by the end of the year?

A: I think it's a possibility but expect a lot of volatility and fears around prospects of a government shutdown this summer and a debt default. Part of the Republican party seems intent on forcing that, and that is not good for bond longs. You get through that, you could have an absolutely ballistic move up in the (TLT), to $120 or even $130.

Q: Would you consider a LEAPS on housing stocks?

A: LEAPS are things you do at multi-year market bottoms, not after 50% moves; and the housing stocks have actually been moving since June; so that was a June story. Buy low, sell high—it’s my revolutionary new concept; most people do the opposite.

Q: Should I invest in Disney (DIS) on a buy it on a Bob Iger turnaround?

A: Yes, but only on a dip; we’ve already had a massive move. If we don’t get a recession, that is fantastic for Disney’s park business.

Q: What is your target for Silver (SLV)?

A: $50/oz. We’re at $20 now. Silver is becoming the new industrial metal, far outstripping any jewelry demand that you used to have; and that’s because of EVs and solar. Who knew that we’re at 10 million homes with solar panels in California now? That is just an enormous number that’s happened mostly in the last five years.

Q: When you look at Natural Gas, would you consider LEAPS?

A: Yes, but I haven’t run the numbers yet. The price has gotten so low, down 80% in eight months that you buy it even if you hate it.

Q: Should I pay attention to demographics when I invest? What is the most important one right now?

A: Demographics are very important, because children born today become customers in 20 years, and companies will start adapting their policies for those customers now in terms of capital investments and so on. It also affects stock markets now. Also, you always want to invest in the country that had the fastest growing population, which used to be China but isn’t anymore. By the way, the reason the US economy has outperformed Europe by 1% a year in GDP growth for the last 70 years is because we allow immigrants, and they don’t. All parties used to be in favor of immigration while now only one is. Why, I don’t understand.

Q: What about a LEAP on Silver (SLV)?

A: That is a possible candidate because we have had a move, but it’s only been about 20%. It’s not like 50% or 100% like we’ve seen with Tesla (TSLA). There are a few asset classes that are still in LEAPS territory—I think Silver would be one of them, and certainly natural gas (UNG). If I were to do a LEAPS, I’d go out 2 years and do something like a $25-$27; the old high is $50. You should get about a 5x leverage on that kind of LEAPS.

Q: Would you buy LEAPS puts on Carvana (CVNA)?

A: Absolutely not. Again, another great one-year-ago idea, not a now idea. Buy Put LEAPS at extreme market tops, not now. Carvana had dropped 95% in the last year.

Q: Is seasonality an important consideration in your trading strategy?

A: Absolutely yes. If you buy stocks in November and do the sell-in-May strategy, your average annual return is something like 20% a year. If you buy stocks in May and sell them in December, the 70-year return on that is zero. I love having the tailwind of seasonality; I can’t remember seeing it when it didn’t work. It’s an important consideration, and we’re right in the middle of the “BUY” season and the market is agreeing with me.

Q: You should do a LEAPS letter.

A: I already do in fact do a LEAPS letter, and it’s called the Mad Hedge Concierge Service where we have a whole website dedicated to just LEAPS. Some ten out of 12 made money last year, and some went up 10X. Contact customer support at support@madhedgefundtrader.com if you’re interested. Concierge members are very happy with their LEAPS coverage.

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

At 29 Palms in my M1 Abrams Tank in 2000

January 30, 2023

Diary, Newsletter, Summary

Global Market Comments
January 30, 2023
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or MY NEW THEORY OF EQUITIES)
(TSLA), (SPY), (TLT), (TSLA), (OXY), (UUP), (AAPL), ($VIX)

CLICK HERE to download today's position sheet.

The Market Outlook for the Week Ahead, or My New Theory of Equities

Diary, Newsletter

After 54 years of trading, and 60 if you count my paper boy days, I have never seen the conventional wisdom be so wrong about the markets.

There was near universal sentiment that we would crash come January. Instead, with have only seen four down days this year. The shorts got slaughtered.

So it’s clear that something brand new is going on here in the markets. I call it “My New Theory of Equities.”

I always have a new theory of equities. That’s the only way to stay ahead of the unwashed masses and live on the cutting edge. After all, I don’t have to run faster than the bear, just faster than the competition to keep you making money.

So here is my new theory.

Many strategists are bemoaning the loss of the free money that zero interest rates made available for the last decade. They are convinced that we will never see zero interest rates again.

But guess what? Markets are acting like free money is about to return, and a lot faster than you think. Free money isn’t gone forever, it is just taking a much-needed vacation.

What if free money comes from somewhere else? You can forget about free money from the government. Fear of inflation has ended that source, unless we get another pandemic, which is at least a decade off.

No, I found another source of free money, and that would be exponentially growing technology profits. Those who don’t live in Silicon Valley are ignorant of the fact that technology here is hyper accelerating and tech companies are becoming much more profitable.

You know those 80,000 tech workers who just got laid off? They all averaged two job offers each from the thousands of startup companies operating from garages and extra bedrooms all around the Bay Area. As a result, the Silicon Valley unemployment rate is well under 2%, nearly half the national average.

I bet you didn’t know that there are over 100 industrial agricultural startups here growing food in indoor ultraviolet lit lowers. It turns out that these use one tenth of the inputs of a conventional input, like water and fertilizer in half the time.

There are hundreds of solar startups in play, many venture capital financed by Saudi Arabia. While the kingdom has a lot of oil, they have even more sunshine. And what are they going to do with all that oil? Use solar generated electricity to convert it to hydrogen to sell to us as “green” energy.

Solar itself will just be a bridge technology to fusion, which you may have heard about lately. What happens when energy becomes free? It boggles the mind. This appears to be a distant goal now. But remember that we went from atomic bombs to nuclear power plants in only 12 years, the first commercially viable one supplying electricity to Pittsburgh in 1957 (click here for the link).

The future happens fast, far faster than we realize. Always.

Here is another anomaly for you. While these massive tech layoffs have been occurring, Weekly Jobless Claims have plunged to a two-year low from 240,000 to only 186,000.

That is because tech workers aren’t like you and me. When they get laid off the first thing, they do is cheer, then take a trip to Europe. They are too wealthy to qualify for unemployment benefits, so they never apply. When they get home, they immediately get new jobs that pay more money with extra stock options.

I know because I have three kids working in Silicon Valley and enjoy a never-ending stream of inside dope.

This means that you need to be loading the boat with tech stocks on every major dip for the rest of your life, or at least my life. The profit opportunities are exponential.

This creates a new dilemma.

You can pick up the easy doubles and triples now just though buying listed companies. But many of the hundred and thousand baggers haven’t even been created yet. That’s where newly unemployed tech workers are flocking to. That’s where you’ll find the next Tesla (TSLA) at $2 trade.

How will you find those? Don’t worry, that’s my job. After all, I found the last Tesla at $2, minting many new millionaires along the way.

My trading performance certainly shows the possibilities of this My New Theory of Equities, which so far in January has tacked on a robust +19.94%. My 2023 year-to-date performance is the same at +19.94%, a spectacular new high. The S&P 500 (SPY) is up +7.32% so far in 2023.

It is the greatest outperformance on an index since Mad Hedge Fund Trader started 15 years ago. My trailing one-year return maintains a sky-high +95.09%.

That brings my 15-year total return to +617.13%, some 2.66 times the S&P 500 (SPX) over the same period and a new all-time high. My average annualized return has ratcheted up to +46.87%, easily the highest in the industry.

Last week, I took profits on my longs in Tesla (TSLA) and Occidental Petroleum (OXY). That leaves me 90% in cash, with one lonely 10% short in the (QQQ). Markets are wildly overextended here; the Volatility Index ($VIX) is at a two-year low at $18, and my own Mad Hedge Market Timing Index is well into “SELL” territory at 70.

My invitation on the long side is wearing thin.

And while I’m at it, let me introduce one of my favorite secret economic indicators.

I call it the “Flat Tire Indicator”.

It goes something like this. The stronger the economy, the more trucks you have driving to new construction sites to build factories and homes. That means more trucks wearing out the roads, creating more potholes, and bouncing more nails out the back.

Tadah! You get more flat tires.

I am not citing this as some Ivory Tower, pie-in-the-sky academic theory. I spent the morning getting a flat tire on my Tesla Model X fixed. This wasn’t just any old tire I could pick up on sale at Big O Tires. It was a Pirelli Scorpion Zero 265/35 R22 All Season staggered racing tire.

Still, Tesla did well. From the time I typed in my request on the Tesla app on my smartphone to the time the repair was completed at my home, only 45 minutes had elapsed.

Still, $500 for a tire Elon? Really?

Elon Musk Ambushed the shorts, with a Massive Short Squeeze Hitting Tesla, up 80% in three weeks and far and away the top-performing major stock of 2023. Tesla now accounts for an incredible 7% of the entire options market. Bearish hedge funds are panicking. It’s dragging the rest of big tech with it. I think we are due for a rest around the Fed interest rates decision in three days. I warned you about an onslaught of good news coming out about Tesla. It has arrived!

Will This Week See the Last Interest Rate Hike, in this cycle on February 1? That’s what stocks seem to be discounting now, with the major indexes up almost every day this year. And even next week may only deliver a 25-basis point hike.

The Fed’s Favorite Inflation Indicator Fell in December, Core PCE up only 4.4% YOY. It’s fanned the tech flames for a few more days. The University of Michigan is calling for only 3.9%.

Q4 GDP is Up 2.9%, far higher than expected. This is becoming the recession that may not show. New car sales went ballistic and there were huge orders for Boeing. Bonds sold off on the news.

Recession Risk Falls, from a 98% probability to only 73% according to an advanced model from JP Morgan Bank. Other models say it’s dropped to only 50%. A soft landing is now becoming the conventional view. The view is most clearly seen in high-yield bonds which have recently seen interest rates plunge. This may become the recession that never happens.

Tech Layoffs Top 75,000, or 2% of the tech workforce. Most get two job offers on hitting the street from the thousands of garage startups percolating in San Francisco Bay Area garages, taking the Silicon Valley unemployment rate below 2%. All tech is losing is the froth it picked up during the pandemic. As I tell my kids, you want to work in the industry where 2% of the US population spin off 35% of America’s profits. Buy big tech on the coming dips.

Tesla Price Cuts Crush the EV Industry, in a clear grab by Elon for market share, already at 65% globally. Teslas are now the cheapest EVs in the world on a per mile basis, and with the new federal subsidies they now qualify for the discount rises to 35%. (GM), (F), and Volkswagen can’t match the cuts because they are already hemorrhaging money on EVs and lack the parts to appreciably boost production. Keep buying (TSLA) on dips, which is up $8 this morning.

Tesla Beats, on both earnings and guidance. It’s looking for 1.8 million vehicles sold in 2023 versus 2022 sales of 1.31 million. Elon is still planning on 50% annual growth over the foreseeable future. The shares jumped an incredible 12% on the news. The Cybertruck will roll out at the end of this year, and I am on the list. The recent price cuts were hugely successful, killing the EV competition, and could take 2023 production to 2 million. It all makes (TSLA) a strong buy and long-term hold on the next $20 dip.

China is Taking Over the Auto World and is the only country that outsold the US in EVs. The Middle Kingdom exported more than 2.5 million cars last year, taking it just behind Germany. The country is targeting 8 million exports by 2030, double Japan’s. What is not said is that most of these will go to low waged emerging countries without auto regulations, safety standards, or even laws. No Chinese cars were sold in the US, far and away the world’s largest market at 15 million units last year in a global market of 67.6 million.

Pending Home Sales Jump in December, up 2.5%, providing more green shoots for the real estate market. This is on a signed contracts-only basis, the best in 14 months. The January numbers will get a huge boost from dramatically lower mortgage rates.

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!

On Monday, January 30 a6 7:30 AM EST, the Dallas Fed Manufacturing Index is announced. NXP Semiconductor (NXPI) reports.

On Tuesday, January 31 at 6:00 AM, the S&P Case Shiller National Home Price Index is updated. Caterpillar (CAT) reports.

On Wednesday, February 1 at 7:00 AM EST, the JOLTS Private Sector Job Openings are released. The Fed Interest Rate Decision is disclosed. Meta (META) reports.

On Thursday, February 2 at 8:30 AM EST, the Weekly Jobless Claims are announced. Apple (AAPL), Amazon (AMZN), and Alphabet (GOOGL) report.

On Friday, February 3 at 8:30 AM EST, the January Nonfarm Payroll Report is printed. Regeneron (REGN) reports.

At 2:00 the Baker Hughes Oil Rig Count is out.

As for me, when Anne Wijcicki founded 23andMe in 2007, I was not surprised. As a DNA sequencing pioneer at UCLA, I had been expecting it for 35 years. It just came 70 years sooner than I expected.

For a mere $99 back then they could analyze your DNA, learn your family history, and be apprised of your genetic medical risks. But there were also risks. Some early customers learned that their father wasn’t their real father, learned of unknown brothers and sisters, that they had over 100 brothers and sisters (gotta love that Berkeley water polo team!) and other dark family secrets.

So, when someone finally gave me a kit as a birthday present, I proceeded with some foreboding. My mother spent 40 years tracing our family back 1,000 years all the way back to the 1086 English Domesday Book (click here).

I thought it would be interesting to learn how much was actually fact and how much fiction. Suffice it to say that while many questions were answered, alarming new ones were raised.

It turns out that I am descended from a man who lived in Africa 275,000 years ago. I have 311 genes that came from a Neanderthal. I am descended from a woman who lived in the Caucuses 30,000 year ago, which became the foundation of the European race.

I am 13.7% French and German, 13.4% British and Irish, and 1.4% North African (the Moors occupied Sicily for 200 years). Oh, and I am 50% less likely to be a vegetarian (I grew up on a cattle ranch).

I am related to King Louis XVI of France, who was beheaded during the French Revolution, thus explaining my love of Bordeaux wines, Chanel dresses, and pate foie gras.

Although both my grandparents were Italian, making me 50% Italian, I learned there is no such thing as a pure Italian. I come it at only 40.7% Italian. That’s because a DNA test captures not only my Italian roots, plus everyone who has invaded Italy over the past 250,000 years, which is pretty much everyone.

The real question arose over my native American roots. I am one sixteenth Cherokee Indian according to family lore, so my DNA reading should have come in at 6.25%. Instead. It showed only 3.25% and that launched a prolonged and determined search.

I discovered that my French ancestors in Carondelet, MO, now a suburb of Saint Louis, learned of rich farmland and easy pickings of gold in California and joined a wagon train headed there in 1866. The train was massacred in Kansas. The adults were massacred, and all the young children adopted into the tribe, including my great X 5 Grandfather Alf Carlat and his brother, then aged four and five.

When the Indian Wars ended in the 1870s, all captives were returned. Alf was taken in by a missionary and sent to an eastern seminary to become a minister. He then returned to the Cherokees to convert them to Christianity. By then Alf was in his late twenties so he married a Cherokee woman, baptized her, and gave her the name of Minto, as was the practice of the day.

After a great effort, my mother found a picture of Alf & Minto Carlat taken shortly after. You can see that Alf is wearing a tie pin with the letter “C” for his last name of Carlat. We puzzled over the picture for decades. Was Minto French or Cherokee? You can decide yourself.

Then 23andMe delivered the answer. Aha! She was both French and Cherokee, descended from a mountain man who roamed the western wilderness in the 1840s. That is what diluted my own Cherokee DNA from 6.50% to 3.25%. And thus, the mystery was solved.

The story has a happy ending. During the 1904 World’s Fair in St. Louis (of Meet me in St. Louis fame), Alf, then 46 placed an ad in the newspaper looking for anyone missing a brother from the 1866 Kansas massacre. He ran the ad for three months and on the very last day his brother answered and the two were reunited, both families in tow.

Today, it costs $169 to get you DNA analyzed, but with a much larger data base it is far more thorough. To do so click here at https://www.23andme.com

My DNA has Gotten Around

It All Started in East Africa

1880 Alf & Minto Carlat, Great X 5 Grandparents

My New Coincident Economic Indicator

January 27, 2023

Diary, Newsletter, Summary

Global Market Comments
January 27, 2023
Fiat Lux

Featured Trade:

(JANUARY 25 BIWEEKLY STRATEGY WEBINAR Q&A),
(RIVN), ($VIX), (SPX), (UUP), (NVDA), (TLT), (LLY), (AAPL), (RTX), (LMT), (USO), (OXY), (TSLA), (UNG), (MSFT)

CLICK HERE to download today's position sheet.