August 13 Biweekly Strategy Webinar Q&A

Below, please find subscribers’ Q&A for the August 13 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: What is your position on copper?

A: I think we’re entering a long-term bull market in copper. You have to have a tripling of the size of the grid just to accommodate the growth of AI, and there’s no way you can do that without a lot of copper. Of course, the picture has been muddled by 50% tariffs coming in on copper imports. Further confusing the picture is that the world’s largest importer is also the world’s largest domestic producer. Where they come out on that, I have no idea—I bet they don’t either. But you want to be buying every copper play on dips. Freeport McMoRan (FCX) had a big 22% dip recently, and I would’ve added a position there, but I’m trying to stay risk-averse this month.

Q: Tesla (TSLA) seems to be defying its fundamentals. Is it time to buy the stock again?

A: I’ve been following Tesla for almost 20 years, and for the 15 years since the stock went public, it has always defied its fundamentals. It’s always been a “belief” stock—a company about chasing a future vision, which was spectacular: a zero-carbon world, going to Mars, launching rockets, etc. People bought into that. Now that the vision has shifted toward pursuing political goals, it has been diluted—if not polluted—so many of their core followers are abandoning them. That’s why you’re seeing falling sales for the second year in a row. It’s amazing the stock hasn’t fallen more yet. I wouldn’t be a buyer here, but if we got a good sell-off back into the $200s, I might consider it. Still, cherry-pick your entry points; this is no longer a “close your eyes and buy” type of stock. Plus, they’re getting more competition from the Chinese, which is another big problem, and the price of copper is going up—every Tesla uses about 200 lbs of copper.

Q: With the closure of Chinese lithium supplies, will this make lithium stocks a buy?

A: It did—a week ago. Look at the charts: they’ve all had big spikes up. But if we get any kind of sell-off or settling down, or if the Chinese company whose license was pulled gets it reinstated, you may get another entry point. I’ll be issuing a LEAPS on Albemarle (ALB), the top US lithium producer. There’s no way the world functions in the future without vast amounts of lithium and lithium processing. Lithium itself isn’t rare—it’s the processing that’s difficult, because it’s highly polluting and very expensive.

Q: Gold has been consolidating for many months now. Do you expect it to continue upward? If so, why?

A: My target for gold in two years is $5,000/ounce. It’s now around $3,500. The fact that it’s consolidating instead of going down is very positive—it sets up a cup-and-handle formation on the charts, which technical analysts love. What’s happened is that while Bitcoin is having this spike, or Bitcoin IPO plays are hot, high-risk speculative money is flowing into Bitcoin instead of gold. When that reverses, gold will take off like a rocket. In addition, we had confusion when a 50% gold tariff was imposed for three days, then removed. If the tariff had stayed, it would have created two global gold markets—a tax-free one and a taxable one. Whenever you tax something, 100% of that trading moves overseas. That’s happened with every other commodity in the past.

Q: Will the Fed cut interest rates (TLT) in September?

A: We have three more inflation reports before the next Fed meeting. If they come in hot, there’s no way the Fed will cut, especially with the economy looking strong—at least according to the administration. A stock market at all-time highs doesn’t signal a struggling economy, even though independent private data is rolling over. If we get a hot non-farm payroll in September, rate cuts are absolutely off the table. That could easily happen, as we’ve seen big swings month-to-month in that data. If there’s no cut, expect a market correction—5–10% on average—because right now, all stock trading is based on the assumption that rates will fall sharply. If that doesn’t happen, you can kiss this bull market goodbye, and we could end the year flat.

Q: If the Fed does cut interest rates, what will be the impact on the dollar?

A: When you cut the yield on a currency, it falls like a rock. That’s why the dollar has already fallen 20% this year, and it would likely fall another 20%. These long sideways moves in the currency charts suggest we’re just pausing in a much longer-term downturn for the U.S. dollar.

Q: Why is oil so dead when the U.S. economy is supposed to be so strong?

A: The US economy is not in the least bit strong, and there are Global recession fears. Even if our economy holds up, it’s at the expense of every other economy in the world. That’s what tariffs are about—bleeding money from other countries and keeping them in recession—which does not bode well for global energy demand. Here in the U.S., the supply-demand balance is weakening thanks to GDP growth dropping by more than half in a year. We’re now growing at about 0.5–0.75%, down from 3% a year ago. That means a big decline in oil consumption. The U.S. uses about 20 million barrels of oil per day, and half of that goes to cars and transportation.

Q: What do you think about the 15% export tax on Nvidia chips? Isn’t this a typical shakedown by the government and extortion?

A: I couldn’t agree more. I’ve never seen the U.S. government interfere in the private sector like this. Jensen Huang, Nvidia’s (NVDA) CEO, says he doesn’t mind, but I’m sure privately he hates it. This is the sort of thing Nazi Germany did—Hitler ran on a free-market policy, then gradually took over industry and converted it for military use, which all ended up in ashes. This won’t be the last effort like this. Most of these actions will probably be thrown out by the courts, but that’s a year or two away. In the meantime, the government will have to refund these illegal taxes. The Constitution’s Commerce Clause prohibits taxing commerce between states—but nobody in Washington seems to care anymore. I expect the government will keep targeting the most profitable industries. If you’re making big money, watch out—they’re coming for their share. And by the way, Nvidia already pays massive amounts in corporate taxes, but apparently that’s not enough for this administration.

Q: How low do you think gold (GLD) might dip before it’s a buy?

A: It’s not dipping—which means the next big move is up. Like I said, buy a little on every down day and average into a good price. Gold has a great long-term future.

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, TECHNOLOGY LETTER, JACQUIE’S POST, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.

 

Good Luck and Good Trading,

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