May 14 Biweekly Strategy Webinar Q&A

Below, please find subscribers’ Q&A for the May 14 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Incline Village, NV.

Q: What are the chances of Tesla (TSLA) getting their robotaxis up this year?

A: No chance. Elon Musk is someone who overpromises and underdelivers on timetables. He uses that as a whip to flog his staff, to make things happen faster. Waymo, on the other hand, has had robotaxis in San Francisco for two years, and they are far down the learning curve in the robotaxi business. They are doing 200,000 robotaxi rides a week, which is really quite amazing. I haven’t ridden one yet, but they’re supposed to be quite fun, and the accident rate is zero. There are no deaths so far on robotaxis, whereas with regular taxis, you can bet there have been quite a few deaths over the same two years, so that’s the big selling point there. At the end of the day, this isn’t a big business, only about $75 billion a year nationwide, so don’t expect a lot of new Tesla profits from robotaxis.

Q: Any opinion on private equity financing companies replacing regular banking?

A: I know there’s been a big boom in private equity and private lending deals, and those are great market-topping type indicators. When times go bad, the liquidity goes to zero, and you can’t get out of anything except at big 80% discounts. It’s kind of junk financing on steroids, great in up markets, not so much in down markets. If you can put money in and leave it untouched for 10 years, it may be okay. Anything short of that, I think it’s something being heavily over-promoted right now to people chasing higher yields, just so people can get another couple extra percent in returns on their investment. Like all things on Wall Street, the opportunities are being over-promoted and the risk under-explained.

Q: What do you think about KKR & Co. (KKR)?

A: That is the quality play in the sector. They’ve already done quite well in this recovery rally, and that’s something. KKR and BlackRock (BLK), the two leaders in the industry, are definitely long-term buys, and I would be looking to get in on any dip. They’re both incredibly well-run companies and money managers. We’ve done several trade alerts on (BLK) in the past.

Q: Do you have any other imminent stop losses?

A: Yes. Nvidia (NVDA)—we’re getting close. We’re at a 2% loss, right where we are now. But the market has just had the biggest rally in 43 years—1982 was the last time. But then, we were coming off a 20% inflation rate and a decade of non-performance in the stock market. So you can hardly compare current events to then, and therefore, a rally of this size is not justified, but it’s happening. It’s there. NVIDIA is up $5 today, so people are pouring back into their favorites. And if the loss increases any more from here, I will stop out of that position.

Q: Should I buy the dip in UnitedHealth Group (UNH)?

A: Absolutely not. As long as RFK is demolishing the Department of Health and Human Services, anything biotech or healthcare related is toxic and a no-touch. And if you don’t believe me, go look at the chart for Eli Lilly (LLY), which has similarly been destroyed.

Q: With all of this FOMO (fear of missing out) and market excitement, is the recession still on?

A: Yes, it is. It will show up in the numbers in the next month. The 2.3% CPI we got this week at 2.3% is probably the last tame one. Just listen to the guidance we got from Walmart (WMT), and it is clear there is total chaos there going on over pricing. They’re used to 3% increases, not 30%. I tend to think we’re going to get another run at the stock market lows when the harsh numbers hit. You can only talk up stocks for so long without real performance. We’ll have to wait and see.

Q: Your market timing index is saying we should have bought when it hit 2?

A: Actually, we did. We put on long positions as fast as I could write the alerts, but you can only write so many alerts in a day; we have since taken profits in all those positions, which is why we’re up so much this year.

Q: I got destroyed by the 5/$570-$580 short puts spread in the S&P 500.

A: Yes, that’s why we issue stop loss on May 5. That’s why we have risk control. If you’re going to behave like a professional trader, you have to do the full package and act like a professional trader. “STOP LOSS” means “get out now as fast as you can.” You can’t just put on positions, and when they go against you, pray that they turn good again. That just doesn’t work. We stopped out with a loss of less than $1,000 a week on our (SPY) position. If you didn’t execute the STOP LOSS, then the losses would be much larger. When 80% of our trade alerts are successful, it’s easy to stop out because 80% of the time, the next trade will be a winner. So, no discipline in this kind of market will put you out of business very quickly, which is why I’ve been doing this now for 55 years, and other people haven’t. Risk control is key. It’s easier to dig yourself out of a small hole than a big one.

Q: What’s the next black swan of 2025?

A: Wait until tomorrow or wait until this weekend. The black swans tend to happen every weekend. And we get a shock 1,000-point move on Monday, which nobody can get in or out of. So there is no way of telling. This is the most unpredictable market in my 55-year career. Two once-in-50-year moves in two months? Go figure.

Q: What do you think about Airbnb (ABNB) here, on the back of more consumer dollars being spent for the rest of the year?

A: I actually like Airbnb—I’m a huge user. I looked at my account the other day, and I’ve stayed at 45 Airbnbs in 16 different countries. And I have some really interesting experiences to share from those. They are moving into other business lines; they are now offering travel insurance, which is a great idea, and Airbnb experiences, inviting people to offer local experiences as part of their setup. I’d be a buyer of Airbnb on dips.

Q: What do you think about the latest consumer price index (CPI) report and future ones?

A: The fact that the report came in so weak at 2.3%, which is near a multi-year low, means that recession fears are overwhelming inflation fears. That’s what that means. We’re not really actually seeing that in prices in the store. I don’t know, but everything I look at in the stores is getting more expensive. And of course, the big price hits have yet to occur when the shelves run empty, which will happen sometime literally in the next few weeks when all of the Chinese goods stop coming to the United States, because the tariffs made trade impossible.

Q: Do you think now is a good time to buy gold (GLD)?

A: I would wait for this rally in stocks to burn out. When it does, you’ll get a big spike up in gold prices. Until then, expect a sideways move in gold. Long-term gold is still in a bull market. I’m aiming for $5,000, but it does need to take a rest after a massive 35% move since the November election.

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, or 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

 

1992 in Hong Kong