Sources: Caixin, IHS Markit
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(Source: Company IR)
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| [FONT=Arial, Helvetica, sans-serif]Global Market Comments December 8, 2020 Fiat Lux[/FONT] [FONT=Arial, Helvetica, sans-serif]FEATURED TRADE:[/FONT] [FONT=Arial, Helvetica, sans-serif](THE BRAVE NEW WORLD OF ONLINE RETAILING), (SNAP), (GPRO), (APRN), (SFIX)[/FONT] [FONT=Arial, Helvetica, sans-serif] 
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The Brave New World of Online Retailing I was flying on first class flight on Virgin America from New York to San Francisco last year, and all I can say is that you meet the most interesting people in first class.[FONT=Arial, Helvetica, sans-serif]The woman sitting next to me was dark-haired, rail-thin, elegantly dressed, and utterly gorgeous. She addressed the flight attendant in a heavy Italian accent. I hadn’t been to the former Roman empire since the summer, so I thought I would give my Italian a workout. What I learned was amazing and opened up nothing less than a peek into the future of retailing. I am always on the lookout for the next “big thing” than can generate a great Trade Alert, and suddenly here was a golden opportunity It turned out that the woman was a senior executive with the fashion house Prada, based in Milan. Why was a fashion executive flying to a city where the hoodie and torn designer jeans were the primary means of dress? She was flying halfway around the world to develop a relationship with Stitch Fix (SFIX), the hottest new concept in online apparel retail. The fact that major companies were flying people in from Europe to check out a small startup said a lot right there. The company’s business model is very simple, if not brave. Consumers fill out a personal profile that includes every conceivable measurement, preference, and lifestyle. A personal stylist is then assigned to you who mails you a monthly box of items they think you would like. For this service, you are charged a “stylist” fee of $20, which can then be applied as a credit towards any purchases. You simply buy the items that appeal and mail the rest back. An artificial intelligence-driven algorithm records your picks and returns and then predicts what you are most likely to buy next time. After several of these cycles, the algorithm knows what you like better than you do and will even mail you special offerings at a discount. Along the way, Stitch Fix will introduce you to styles and brands that you never would have thought of. In order words, it does all the thinking for you. The company has already clocked $1 billion in revenues in 2017 and is on an exponential growth trajectory. Stitch Fix boasts an operating gross margin of 44%, well in excess of traditional retailers like Macy’s (M), Kohl’s (KSS), The Gap (GPS), and JC Penny (JCP). Originally targeting Millennials, it quickly learned that its real market was with middle-aged professional women who don’t have time to shop. It is already marketing 700 brands and is working to establish its own brands where the real margins are. Some 95% of the firm’s employees are women. The recent history of tech IPOs has not been great ((SNAP), (GPRO), (APRN), etc.). However, given the current online retail explosion, I have great hopes for (SFIX). Just to have some fun, I filled out a profile but listed my age as 25. I can’t wait to see what they send me. Hopefully, I won’t blow up their algorithm. To place your first order with Stitchfix, please visit their website by clicking here.[/FONT] [FONT=Arial, Helvetica, sans-serif][/FONT] [FONT=Arial, Helvetica, sans-serif]
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Quote of the Day “A man who is the master of patience is the master of everything else,” said George Saville, a professional soccer player. 
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| Global Market Comments December 14, 2020 Fiat Lux FEATURED TRADE: (MARKET OUTLOOK FOR THE WEEK AHEAD, or THE GREAT ASSET SHORTAGE), (INDU), (PFE), (MRNA), (PTON), (DOCU), (ETSY), (CAT), (JPM), (BABA), (TSLA), (TLT), (ABNB), (DIS) 
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The Market Outlook for the Week Ahead, or The Great Asset Shortage Markets are wonderful arbiters of the laws of supply and demand.When there is a shortage of a particular security, Wall Street has a magical ability to manufacture more by running the printing presses to meet supply, or in the modern incarnation, open the spreadsheets. Except for this time. The amount of new cash created by global quantitative easing and the prolific saving habits of locked up Americans are creating more demand than even this efficient highly process can accommodate. Which means that prices can only go up. How long and how far is anyone’s guess. My target for the Dow Average is 120,000 in ten years, but even I don’t expect that to take place in a straight line. So, we are all sitting on our hands waiting for the next pullback to buy into, which may….or may not ever happen. A lot of Dotcom Bubble memories are rising up from the dead. Analysts in 1999 made outlandish forecasts of stocks rising 50% in a year, which then took place in four days. That happened to Tesla (TSLA) last month and Airbnb (ABNB) last week. In the meantime, the smartest traders, call them the oldest traders, are taking profits on the best years of their careers. Of course, the short-term direction of the market will be determined by the January 5 Georgia Senate election, where the polls are in a dead heat. The last time this happened, during the presidential election, the Democrats won by a microscopic 15,000 vote margin. If history repeats itself, the Biden administration will get an extra $6 trillion to play with to restore the shattered US economy. Think $2 trillion for infrastructure spending in all 50 states, $2 trillion for the rescue of bankrupt states and municipalities, $1 trillion for alternative energy and EV subsidies, and another $1 trillion in odds and ends. Needless to say, much of this will end up in the stock market. I am getting a lot of questions these days regarding what will end this once-in-a-generation runaway bull market. The pandemic created this bull market by accelerating technology, business evolution, and corporate profitability by ten years. I bet a year ago, you weren’t spending your day on Zoom meetings, as I was. The great irony is that the Pfizer (PFE) and Moderna (MRNA) vaccines may not only kill Covid-19, but the bull market as well. That’s because money will then come out of stocks and go back to the real economy. That makes pandemic darlings like Peloton (PTON), DocuSign (DOCU), and Etsy (ETSY) especially risky. But then 6% growing GDPs were never what stock market crashes were made of, so any declines will be modest. As for my own positions, I have a rare 100% long portfolio, mostly Tesla, but also the (TLT), (CAT), (JPM), and (BABA), 80% of which expires with the option expiration on Friday, December 18. After that, I’ll take it easy with 10% short (TLT) and 10% long (TSLA) and wait for the market, or Georgians to tell me what to do. A flood of money is to hit the stock market, says hedge fund legend Ray Dalio. The US is facing a perfect storm in favor of all risk assets. There is no reason why price earnings multiples for American stocks can’t reach 50X, double the current 25X. Buy what the central banks are buying. The funny thing is that I agree with Ray on everything. Buy risk on dips. Stocks will keep soaring into 2021, says JP Morgan strategist Marko Kolanovik. The more risk the better. The Fed will keep interest rates low for at least another year, and ultra-low rates will force big institutions out of bonds and into stocks. Volatility (VIX) will decline. It all sounds like a great long stock/short bond trade to me. Hmmmmm. Tesla completed a $5 Billion share issue, after a move to $650, up $142 from my November Mad Hedge BUY recommendation. The stock seems hell-bent on testing the Goldman Sachs $780 price recommendation before the December 18 S&P 500 entry. Elon Musk’s creation is now worth a staggering $608 billion. It’s the best recommendation in the 13-year history of the Mad Hedge Fund Trader. San Francisco rents dive 35%, as tech workers flee to the suburbs. A lot of remote work is now permanent. Studio apartments are now a mere $2,100, and a one-bedroom can be had for $2,716. For a two-bedroom if you have to ask, you don’t need to know. Shocking! Sales of million-dollar homes are soaring, as ultra-low interest rates persist and people spend much more time at home. So, bigger for your pod is better. Mortgages over $766,000 are up 57% YOY. Jamie Diamond says he wouldn’t touch bonds with a ten-foot pole, and nor would I. A 91-basis point yield just doesn’t do it for the chairman of JP Morgan Chase (JPM), one of my recurring longs. Stocks are a much better choice, even if there is a bubble in progress. Keep selling every rally in fixed income, especially the (TLT). Weekly Jobless Claims soar to 853,000, up a massive 153,000 from the previous week. To see this happen during the Christmas hiring season is heartbreaking. With 200,000 a day falling to Covid-19, I’m surprised it's not higher, which means it will be. This is what peaks look like. Washington has totally given up. An $800 billion payday for the bay area. That is the amount of wealth created by just two companies, Tesla (TSLA) and Airbnb (ABNB), since March. And the great majority of shareholders live in the San Francisco Bay Area, including its venture capital and pension funds. No wonder home prices in the suburbs are up 20% YOY. The great irony is that (ABNB) received a massive government bailout only in March. I hope they repay the loans early. Is Cuba the next big play? A Biden détente could lead to the emerging market investment opportunity of the decade with the $43 million Herzfeld Caribbean Basin Fund (CUBA). It just had its best month in 11 years (like many of us). With Fidel Castro long dead, what’s the point in continuing a 60-year-old cold war. A big market for American products and services beckons, not to mention the tourism and cruise opportunities. But can Biden afford to lose the Florida Cuban vote in the next election? When we come out the other side of the 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 Global Trading Dispatch catapulted to another new all-time high. December is up 8.55%, taking my 2020 year-to-date up to a new high of 64.99%. That brings my eleven-year total return to 420.90% or more than double the S&P 500 over the same period. My 11-year average annualized return now stands at a nosebleed new high of 38.26%. My trailing one-year return exploded to 66.30%, the highest in the 13-year history of the Mad Hedge Fund Trader. The coming week will be a slow one on the data front. We also need to keep an eye on the number of US Coronavirus cases at 16 million and deaths 300,000, which you can find here. When the market starts to focus on this, we may have a problem. On Monday, December 14 at 12:00 PM EST, US Consumer Inflation Expectations for November are released. On Tuesday, December 15 at 11:00 AM, the New York Empire State Manufacturing Index for December are published. On Wednesday, December 16 at 8:00 AM, US Retail Sales for November are printed. On Thursday, December 17 at 8:30 AM, the Weekly Jobless Claims are published. We also get November Housing Starts. On Friday, December 18, at 2:00 PM, we learn the Baker-Hughes Rig Count. As for me, I was stunned to learn that 84 million people are watching The Mandalorian, the latest Star Wars installment Disney (DIS) launched in its hugely successful streaming service a year ago. It reminds me of when I first saw Star Wars in 1977. I was changing planes in Vancouver, Canada on the way to Tokyo and used a long layover to take a taxi to the nearest theater to catch a film I’d heard so much about. I was amazed when I realized that the guy sitting in the next seat had memorized the entire script and was mouthing all the words. The only other time I have ever seen this happen was sitting on the benches at Shakespeare’s Globe Theater in London. At least then, they were reciting Romeo and Juliet. Stay healthy. John Thomas CEO & Publisher The Diary of a Mad Hedge Fund Trader 
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Quote of the Day “It’s a funny thing about life. If you refuse to accept anything but the best, you very often get it,” said British Novelist, Somerset Maugham. 
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| Global Market Comments December 15, 2020 Fiat Lux FEATURED TRADE: (A NOTE ON OPTIONS CALLED AWAY), (MSFT), (TLT), (BA), (GOOGL), (SPY) 
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A Note on Assigned Options, or Options Called Away I know all of this may sound confusing at first. But once you get the hang of it, this is the greatest way to make money since sliced bread.I still have a record eight positions left in my model trading portfolio, and they are all deep in-the-money. That opens up a set of risks unique to these positions. I call it the “Screw up risk.” Here they are: the Tesla (TSLA) December 2020 $392-$420 in-the-money vertical Bull Call spread the Tesla (TSLA) December 2020 $400-$430 in-the-money vertical Bull Call spread the Tesla (TSLA) December 2020 $450-$480 in-the-money vertical Bull Call spread the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December2020 $148-$151 in-the-money vertical bull call the iShares Barclays 20+ Year Treasury Bond Fund (TLT) December2020 $164-$167 in-the-money vertical Bear Put spread the JP Morgan (JPM) December 2020 $100-$105 in-the-money vertical Bull Call spread the Caterpillar (CAT) December 2020 $145-$150 in-the-money vertical Bull Call spread the Alibaba (BABA) December 2020 $220-$240 in-the-money vertical Bull Call spread As long as the markets maintain current levels through Friday, ALL of these positions will expire at their maximum profit values. With the December 18 options expirations only four trading days away, there is a heightened probability that your short position in the December options gets called away. If it happens, there is only one thing to do: fall down on your knees and thank your lucky stars. You have just made the maximum possible profit for your position instantly. Most of you have short option positions, although you may not realize it. For when you buy an in-the-money vertical option spread, it contains two elements: a long option and a short option. The short options can get “assigned,” or “called away” at any time, as it is owned by a third party, the one you initially sold the put option to when you initiated the position. You have to be careful here because the inexperienced can blow their newfound windfall if they take the wrong action, so here’s how to handle it correctly. Let’s say you get an email from your broker telling you that your call options have been assigned away. I’ll use the example of the Caterpillar call spread. For what the broker had done in effect is allow you to get out of your call spread position at the maximum profit point four days before the December 18 expiration date. In other words, what you bought for $4.40 in November is now $5.00, giving you a near-instant profit of 13.63%! In the case of the Caterpillar (CAT) December 2020 $145-$150 in-the-money vertical bull call spread, all you have to do is call your broker and instruct them to “exercise your long position in your (CAT) December 18 $145 calls to close out your short position in the December 18 $150 calls.” This is a perfectly hedged position, with both options having the same name and the same expiration date, so there is no risk. The name, number of shares, and number of contracts are all identical, so you have no exposure at all. Calls are a right to buy shares at a fixed price before a fixed date, and one options contract is exercisable into 100 shares. To say it another way, you bought the (CAT) at $145 and sold it at $150, paid $2.40 for the right to do so, so your profit is 60 cents, or ($0.60 X 100 shares X 23 contracts) = $1,380. Not bad for an 22-day limited risk play. Sounds like a good trade to me. Weird stuff like this happens in the run-up to options expirations like we have coming. A call owner may need to buy a long (CAT) position after the close, and exercising his long December $150 call is the only way to execute it. Adequate shares may not be available in the market, or maybe a limit order didn’t get done by the market close. There are thousands of algorithms out there which may arrive at some twisted logic that the puts need to be exercised. Many require a rebalancing of hedges at the close every day which can be achieved through option exercises. And yes, options even get exercised by accident. There are still a few humans left in this market to blow it by writing shoddy algorithms. And here’s another possible outcome in this process. Your broker will call you to notify you of an option called away, and then give you the wrong advice on what to do about it. This generates tons of commissions for the broker but is a terrible thing for the trader to do from a risk point of view, such as generating a loss by the time everything is closed and netted out. There may not even be an evil motive behind the bad advice. Brokers are not investing a lot in training staff these days. In fact, I think I’m the last one they really did train. Avarice could have been an explanation here but I think stupidity and poor training and low wages are much more likely. Brokers have so many ways to steal money legally that they don’t need to resort to the illegal kind. This exercise process is now fully automated at most brokers but it never hurts to follow up with a phone call if you get an exercise notice. Mistakes do happen. Some may also send you a link to a video of what to do about all this. If any of you are the slightest bit worried or confused, by all of this, come out of your position RIGHT NOW at a small profit! You should never be worried or confused about any position tying up YOUR money. Professionals do these things all day long and exercises become second nature, just another cost of doing business. If you do this long enough, eventually you get hit. I bet you don’t. 
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Quote of the Day “Stock prices have reached what looks like a permanently high plateau,” said economist Irving Fisher….just before the 1929 stock market crash. 
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MNKKQ
