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| Global Market Comments March 2, 2021 Fiat Lux Featured Trade: (DINNER WITH DAVID POGUE), (TSLA) (WHY DOCTORS MAKE TERRIBLE TRADERS) 
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Dinner with David PogueThe last public event I attended before the pandemic hit was a dinner with David Pogue, the science and technology writer for the New York Times. It was a night well spent. David believes that climate change is no longer an “if”, or a "maybe” but a certainty. The sooner we start adapting our lives to it, the better. The bottom line is that a big piece of the world is about to become unhabitable by humans, possibly as much as the 20% around the equator. The loss of life could be huge. Raise sea levels by 20 feet and you lose all the coastal cities of China, a large part of the US east coast, and most of Florida. The US government will have to end flood insurance or go bankrupt. It is already tearing down oceanfront homes that have filed two or three federal claims. Many species of fish, animals, and birds have been migrating north and south for decades. Indeed, tropical game fish, like mahi mahi, have been showing up along the California coast in recent years, to the delight of local fishermen. There has been a massive migration of hummingbirds north to Oregon. Global warming could be halted in decades. But to return to pre-1970 levels would be a century-long project. Ironically, the Coronavirus started on that work right after we met, bringing the global economy to a grinding halt and dramatically shrinking the population. US lifespans shrank in 2020 for the first time in 100 years, by one full year. We spent a lot of time at Mad Hedge Fund Trader talking about future technologies. It will be a huge net job creator over time, but the disruptions to existing industries will be enormous. Steelworkers don’t morph into computer programmers easily, although I’ve seen some of the younger ones do it. When I told him I was one of the first Tesla (TSLA) buyers 11 years ago and my name still stood on the factory wall, he reached out to shake my hand and say “thank you.” He was shocked when I told him most commercial pilots can’t safely fly a plane without a functioning autopilot. I met David on what was certainly the worst timed book tour in the history for the soon-to-be-published How to Prepare for Climate Change. There he offers highly practical advice on preparing for an era of extreme weather events, possible famines, floods, and other climate-caused chaos. Click here for the Amazon link. The 58-year old Ohio native has an unusual eclectic background, not unlike my own. He graduated from Yale with a degree in music, summa cum laude. He went on to become an itinerant Broadway producer. It was probably his desire for a steady paycheck that drove him into writing, taking a 12-year job at Macworld magazine, of which I was a steady reader. David published the first Mac for Dummies book in 1988. He went on to write six more of the original “Dummies” books, including those for iBooks, Opera, Classical Music, and Magic. He became the personal technology correspondent for the New York Times in 2000. David has hosted the Nova TV series for PBS, programs for the Science and Discovery channels. A five-time Emmy winner for his stories on CBS Sunday Morning, Pogue has been at the forefront of new and emerging tech trends for decades. There you can hugely benefit from his annual Christmas technology gift tips. To learn more about David Pogue please visit his website at https://davidpogue.com 
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Why Doctors Make Terrible TradersAt my last Global Strategy Luncheon, I had the pleasure of sitting next to an anesthesiologist who was a long-time reader of my stock market research. As much as he loved my service, he confided in me that his trading results were awful. I told him I knew why. Doctors, scientists, aircraft pilots, and even anesthesiologists all share the same problem. As smart as they are to plow through 12 years of college studying subjects of mind-numbing difficulty, obtaining MDs, PhDs, and ATPL licenses, they are terrible when it comes to trading their own stock portfolios. A doctor friend once confessed to me that as fast as he was taking money in at his seven-digit-a-year private practice, he was shoveling it out the door in trading and investment losses. And if he got mad at it, or grew stubborn, the losses then compounded. He considered it a disease, or a gambling addiction. I have to admit that I once suffered from the same malady, as I was originally trained as a scientist and mathematician. That is until I identified the problem and dealt with it. And here is the dilemma. Science, medicine, and flying high-performance aircraft all require tremendous degrees of precision. The practitioners have to be exactly right about everything all the time. If they aren’t, people die. Let me give you some examples. I happen to know that the daily dosage for the heart drug Digitalis is 0.25 mg per day. If you accidentally raise that to 0.50 mg, you die, especially if you have small body weight. I also happen to know that the stall speed of a Boeing 787 Dreamliner is 125 miles per hour. At 126 miles per hour, everything is fine. But at 124 miles per hour, you risk stalling on approach, crashing, and killing everyone aboard, especially if it is hot and humid, wind shear is present, and you are overweight. So as far as doctors are concerned, the premium is on precision. This absolutely does NOT work in the stock market. For precision means buying stocks at their perfect absolute lows and selling them at the perfect top ticky highs. The problem is that this is impossible. I have been trading stocks for almost 50 years and can think of only a handful of times when I nailed the perfect highs and lows. When I did, it was purely because of random chance, by accident. By insisting on perfection in his stock execution, doctors miss every trade. They then get frustrated and chase the market, throwing all discipline out the window. This is where the losses ensue. I can almost see the knowing nods of agreement out there. It gets worse. Doctors are used to working with a perfect set of facts, a lab report, a pulse rate, a temperature, or an MRI scan. In the stock market, you have to deal with the fog of war. The facts you have at hand may or may not be true. New, contradictory information is getting dumped on you all day long. And the guy on TV is usually telling you the exact opposite of what you should be doing. Most talking heads on the boob tube are in fact failed traders. After a couple of decades, you get used to operating in a world of uncertainty. You learn which information sources to trust and which ones to ignore when the fur starts to fly. After much practice, you learn how to make the right decision when push comes to shove. Unless doctors work in an emergency room or in combat with the military, they don’t get to learn how to make decisions in the fog of war. To them, markets all seem like a mass of confusing and conflicting information. For the perfectionist, it’s their worst nightmare. No wonder they lose money. So doctors have three choices when it comes to their investment portfolio. They can index, balance stocks against bonds, and get used to subpar returns. They can hand it over to a professional financial advisor, out of harm’s way. Or they can learn the tricks of the trade that I have, which is the purpose of this newsletter. If you learned from my own half-century accumulation of mistakes, you don’t have to repeat them yourself. Your portfolio will love it! Now that I have your attention, I have this pain in my back that keeps bothering me…. 
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Quote of the Day"Only losers average losers," said my friend and former client, trading legend Paul Tudor Jones. 
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| Global Market Comments March 3, 2021 Fiat Lux Featured Trade: (THE DEATH OF PASSIVE INVESTING), (SPY), (SPX), (INDU) (NOTICE TO MILITARY SUBSCRIBERS) 
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The Death of Passive InvestingPassive Investing, or piling all your money in major stock indexes like the S&P 500 (SPX) or the Dow Average (INDU), just got killed off by the Coronavirus. The days when you could just index and then go play golf for the rest of the day are gone for good. Rest in Peace. On a good day, your investments reliably underperformed the indexes, less management fees and hidden expenses. Even indexers have to work to earn a living. That was fine as long as the indexes went up like clockwork, as they did almost every year for the last 12 years. Enter Covid-19. Many individual investors instantly had heart attacks when they opened their quarterly pension fund and 401k statements in June 2020. I have to admit that I was getting pretty sick of index investing. People like me would slave over their computers all day long in some years barely beating the returns of those who never lifted a finger. That is now ancient history. Look no further than my own performance year to date. I managed to clock a 26% gain so far in 2021, compared to a pitiful 3.2% for the Dow Average. This could be another 100% year for me, as in the past 12 months. How will your index fund perform when US pandemic deaths hit 600,000, which is now being forecast by Johns Hopkins University? The global pandemic is creating a brave new world on countless fronts, and management of your retirement funds is no different. Passive investing will be replaced by active investment whereby educated individuals pick winning stocks and judiciously avoid the awful ones. The bad news is that you will have to work harder to oversee your nest egg. The good news is that you will make a lot more money. The difference between passive and active investment is now greater than in any time in history, and that chasm is set to increase. While the bull market allowed all stocks to go up equally, the new one is totally different. There is about to be a huge differentiation between winners and losers like never seen before. The difference between the wheat and the chaff will be enormous. Those who figure out the new game early will prosper mightily. Those who don’t will crash and burn. I have been fighting a daily battle with some of my own subscribers, as they are arguing that the biggest gains will simply be made from buying the biggest losers. I’m not buying that logic for a nanosecond. Many of the worst performers are never coming back to their former glory, such as airlines, cruise lines, hotels, movie theaters, restaurant chains, and casinos. Sure, they may have a brief dead cat bounce off the bottom for a trade. But the long-term outlook for these ill-fated industries is grim at best. No, the future lies in buying Teslas and Rolls Royces at KIA prices. Come in today at these distressed levels and you may earn as much as 15% a year for the next decade. You know the companies I am talking about, the ones I have been covering at great length in Global Trading Dispatch, The Mad Hedge Technology Letter, and the Mad Hedge Biotech & Healthcare Letter. If you are missing any of these publications, please feel free to pick them up here.Please note that all our prices are going up substantially soon. This is going to lead to a very interesting future. Those who continue to index are looking at years of subpar performance. Those who go active and do it the right way are going to be looking pretty. It’s going to be a fun decade. The Roaring Twenties have only just begun. Good Luck and Good Trading John Thomas Mad Hedge Fund Trader 
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Notice to Military SubscribersTo the dozens of subscribers in Afghanistan, Somalia, and Iraq, and the surrounding ships at sea, thank you for your service! I think it is very wise to use your free time to read my letter and learn about financial markets in preparation for an entry into the financial services when you muster out. Nobody is going to call you a baby killer and shun you, as they did when I returned from Southeast Asia five decades ago. In fact, employers have been given fantastic tax breaks and other incentives to hire you. I have but one request. No more subscriptions with .mil addresses, please. The Defense Department, the CIA, the NSA, Homeland Security, and the FBI do not look kindly on private newsletters entering the military network, even the investment kind, even ones from veterans like me. If you think civilian spam filters are tough, watch out for the military kind! And no, I promise that there are no secret messages embedded with the stock tips. “BUY” really does mean “BUY.” “Sell” means “Sell” too. If I did not know the higher-ups at these agencies, as well as the Joints Chiefs of Staff, I might be bouncing off the walls in a cell at Guantanamo by now wearing an orange jumpsuit. It also helps that many of the mid-level officers at these organizations have made a fortune with their meager government retirement funds following my advice. All I can say is that if the Baghdad Stock Exchange ever becomes liquid, I'm going to own it. Where would you guess the greatest concentration of readers The Diary of a Mad Hedge Fund Trader is found? New York? Nope. London? Wrong. Chicago? Not even close. Try a ten-mile radius centered on Langley, Virginia, by a large margin. The funny thing is, half of the subscribing names coming in are Russian. I haven't quite figured that one out yet. Did we hire the entire KGB at the end of the cold war? If we did, it was a great move. Those guys were good. That includes you, Yuri. So, keep up the good work, and fight the good fight. But please, only subscribe to my letter with personal Gmail, Yahoo, or Hotmail addresses. That way my life can become a lot more boring. Oh, and by the way, Langley, you're behind on your bill. Please pay up, pronto, and I don't want to hear whining about any damn budget cuts! 
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Quote of the Day"Since 9-11, the government knows a lot more about you than you know about them, and the government likes that. But that's not what the American people want," said California Republican Congressman, Daryl Issa. 
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March 4, 2021 |
| Good morning. (Was this newsletter forwarded to you? Sign up here.) |
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| [h=2]Leading indicators[/h] |
| Almost a year ago — on March 11, to be exact — the World Health Organization officially declared that the spread of the coronavirus was a pandemic. Lockdowns and social distancing soon became a fact of life, and companies that rely on people gathering and moving around were hit hard. |
| But in recent weeks, many of these businesses have said they see signs that people are preparing to go out again: to the office, on vacation and elsewhere. Taken together, these indicators suggest that a reopening might be around the corner, as vaccines roll out, the weather changes or people simply seek out something new after so long in isolation. |
| Clothes. Richard Hayne, the C.E.O. of Urban Outfitters, told investors this week that its brands had recently been selling more “going out-type apparel.” In the last week of February, seven of Anthropologie’s top 10 sellers online were dresses, which may suggest that shoppers are preparing for life beyond Zoom. “Over the past year, we were lucky if they included one or two dresses,” Mr. Hayne said. |
| Concert tickets. “We’re feeling more optimistic than we were a month ago,” Live Nation’s chief executive, Michael Rapino, said on an earnings call last week. When the company recently released nearly 200,000 tickets for summer music festivals in Britain, they sold in days. |
[h=3]ADVERTISEMENT[/h]
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| Trips to Vegas. Tom Reeg, the C.E.O. of the casino giant Caesars Entertainment, told analysts that bookings were up 20 percent month on month. “It’s almost like a switch was flipped sometime late January, early February,” he said last week. Apollo’s co-head of private equity, David Sambur, cited these numbers when explaining the firm’s big bet on a Las Vegas recovery: the $6.25 billion acquisition of the Venetian casino and expo center announced yesterday. |
| Cruise bookings. Royal Caribbean’s chief executive, Michael Bayley, recently told investors that the company recorded a 30 percent jump in new bookings this year, compared with the last two months of 2020. A large share are people over 65, who are counting on being vaccinated soon, Mr. Bayley suggested. The company, which suspended most cruises through April, launched a $1.5 billion stock sale this week. |
| Gym memberships. January marked the first month that Planet Fitness saw a net increase in memberships since the pandemic began, according to Chris Rondeau, the gym chain’s chief. The uptick “reinforces our belief that people want to return to bricks-and-mortar fitness,” he told analysts. |
| But not movie tickets (yet). Alamo Drafthouse filed for bankruptcy yesterday, making it one of the most prominent movie chains to seek Chapter 11 protection during the pandemic. Still, it expressed some optimism, “because of the increase in vaccination availability, a very exciting slate of new releases and pent-up audience demand,” said Tim League, the company’s founder. |
[h=3]ADVERTISEMENT[/h]
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| What else? Have you spotted any other indicators that the economy might be reopening? Let us know: dealbook@nytimes.com. |
| P.S.: Here’s why scientists say that people should be careful even after being vaccinated. |
| [h=3]HERE’S WHAT’S HAPPENING[/h] |
| President Biden limits eligibility for stimulus checks. He agreed to stricter income limits for the next round of stimulus checks to win over moderate Democrats in the Senate, as he tries to corral support for his $1.9 trillion rescue bill, which will be debated in the Senate starting today. Separately, the House abruptly canceled its session today amid warnings of a potential militia plot. |
| Google plans to halt advertising based on users’ browsing history. The search giant said it would eventually stop selling web ads targeted to individuals’ internet habits. But Recode notes that Google won’t stop collecting user data, particularly on mobile devices and through its own properties like Google search. |
[h=3]ADVERTISEMENT[/h]
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| Facebook restarts political advertising. After imposing a ban to clamp down on misinformation during the election, the social network told political advertisers it would begin to allow new ads about “social issues, elections or politics.” |
| Many businesses plan to maintain mask requirements in Texas. Target, Macy’s, Kroger and others said they would still demand that customers and employees wear face masks after the state lifted its mandate this week. Frontline workers are likely to shoulder more responsibility for enforcement, and perhaps more harassment in response. |
| Britain’s economic revival plan: spend now, tax later. The country’s finance minister, Rishi Sunak, set out a budget yesterday that increases pandemic spending to $480 billion, including an extension for a furlough program through September. The budget also calls for higher corporate taxes starting in 2023, their first rise in Britain since the 1970s. |
| [h=2]Too much of a good thing?[/h] |
| The economy is recovering from the pandemic — see above — and a $1.9 trillion stimulus is making its way through Congress to provide even more support. So, naturally, investors are getting a little worried, The Times’s Matt Phillips writes. |
| Stock and bond markets are wobbling. Another sharp drop in S&P 500 yesterday came after the index recorded its worst weekly performance in a month last week. (Stars of the pandemic, like Shopify and Zoom, have suffered in particular.) Bond yields are up sharply so far this year. |
| The likely reason is a little counterintuitive. The strong economic rebound might presage a long-feared rise in inflation, which may spur the Fed to finally raise interest rates. Or as Lisa Shalett, the chief investment officer at Morgan Stanley Wealth Management, put it: “The better and better things are, the less and less rationale the Fed has for keeping rates at zero.” |
| Expect Jay Powell to get questions about it today. The Fed chair is set to speak at a Wall Street Journal event at noon Eastern, and may have something to say about the markets. The Times’s Jeanna Smialek outlines what steps the central bank could take, when or if it finally feels compelled to act to address rising bond yields. |
| [h=2]“Our SPAC’s are multi-year, not quick flip type of investments. I’d caution retail investors against investing in these SPAC’s.”[/h] |
| — Vinod Khosla, whose venture firm launched its fourth SPAC last month, explaining the risks (and rewards) of blank-check companies on Twitter. |
| [h=2]Former financial regulators to Supreme Court: ‘Tread carefully’[/h] |
| A group of former S.E.C. officials urged Supreme Court justices to “tread carefully” in a new “friend of the court” brief supporting pension funds in a class-action case against Goldman Sachs. The funds argue that Goldman misled them in its corporate statements, and the bank hopes to prevent them being able to bring the case as a group. The ex-regulators warn that a victory for the bank on this would harm market integrity: “Companies and corporate executives can have considerable incentives to maintain a falsehood that is propping up a stock price.” |
| “Private cases play a crucial police function,” Robert Jackson Jr., an N.Y.U. law professor and former S.E.C. commissioner, told DealBook, arguing that the court should let investors sue as a group. |
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| “For the capital markets to work, the people actually putting money in have got to know they are getting good information,” said Lynn Turner, a former chief accountant of the S.E.C. “When you don’t have that, and the information is bad, investors flee, like during the 2008 mortgage finance crisis.” If the Supreme Court rules in favor of Goldman, “we could have another crisis within 10 years, maybe sooner,” he said. |
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| [h=2]Dallas does Dogecoin[/h] |
| Dogecoin is a cryptocurrency based on a 2013 meme — old in internet years — featuring a perplexed Shiba Inu dog. The token was created to mock crypto culture, but is now worth serious money and embraced by the likes of Elon Musk and Snoop Dogg. As of today, it’s also a way to pay for tickets and merchandise for the N.B.A.’s Dallas Mavericks. |
| Mark Cuban said the basketball team decided to accept Dogecoin “because we can!” In announcing the move, which DealBook is first to report, the billionaire owner of the team added in a statement, “Sometimes in business you have to do things that are fun.” The transactions will be processed by the crypto payments company BitPay, which has handled Bitcoin purchases for the Mavs since 2019. |
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| Still confused? “For those of you who would like to learn more about Dogecoin,” Mr. Cuban said, “we strongly encourage you to talk to your teenagers who are on TikTok and ask them about it. They will be able to explain it all to you.” |
| Thank you for your support. Want to share The New York Times? Friends and family can enjoy unlimited digital access to our journalism at a special rate. |
| [h=3]THE SPEED READ[/h] |
| Deals |
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| Politics and policy |
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| Tech |
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| Best of the rest |
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| Global Market Comments March 4, 2021 Fiat Lux Featured Trade: (THE BARBELL PLAY WITH BERKSHIRE HATHAWAY), (BRKA), (BRKA), (BAC), (KO), (AXP), (VZ), (BK) (USB), (TLT), (AAPL), (MRK), (ABBV), (CVX), (GM), (PCC), (BNSF) 
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The Barbell Play with Berkshire HathawayIt’s time to give myself a dope slap. I have been pounding the table all year about the merits of a barbell strategy, with equal weightings in technology and domestic recovery stocks. By owning both, you’ll always have something doing well as new cash flows bounce back and forth between the two sectors like a ping pong ball. After all, nobody gets sector rotation right, unless they have been practicing for 50 years, like me. Full disclosure: I have to admit that after 50 years of following him, I love Buffet. He was one of the first subscribers to my newsletter when it started up in 2008. Some of his best ideas have come from the Mad Hedge Fund Trader, like buying Bank of America for $5 in 2008. Oh, and he hates Wall Street for constantly fleecing people. Ditto here. In reading Warren Buffet’s annual letter (click here for the link), it occurred to me that his Berkshire Hathaway (BRKB) shares were in effect a one-stop barbell investment. For a start, Warren owns a serious slug of Apple (AAPL), some $120 billion worth, or 2.5% of the total fund. That gives (BRKB) some technology weighting. It cost him only $20 billion. The dividends he received entirely paid for the initial cost. So he owns 4% of Apple for free. I remember the battle over the initial “BUY” five years ago. Warren fought it, insisting he didn’t understand the smart phone business. In the end, he bought Apple for its global brand value alone. That is Warren Buffet to a tee. The next five largest publicly listed holdings are Bank of America (BAC), Coca-Cola (KO), American Express (AXP), and Verizon Communications (VZ). These are your classic domestic recovery sectors. And with a heavy weighting in other banks (BK) (USB), Buffet is effectively short the bond market (TLT), another position I hugely favor. Also included in the package is a liberal salting of pharmaceuticals, Merck (MRK) and AbbVie (ABBV). He has a small energy weighting with Chevron (CVX). He even has a position in old heavy metal America with General Motors (GM). Berkshire is also one of the world’s largest property & casualty insurance owners. Its current “float” is $138 billion. You all know his flagship holding, GEICO. And the gecko mascot isn’t going anywhere as long as Warren lives. It was Warren’s idea. It all seems to work for Warren. In 2020, he earned a staggering $42.5 billion. All told, Berkshire’s businesses employ 360,000, second to only Amazon (AMZN), and is the largest taxpayer in the United States, accounting for 3% of government revenues. Berkshire is also the largest owner of capital goods & equipment in the US worth $156 billion, topping (AT&T). Many of Warrens's early 1956 $1,000 investors are millionaires many times over….and over 100 years old, prompting him to muse if ownership of his shares extended life. Warren’s annual letter, which he spends practically the entire year working on, is always one of the best reads in the financial markets. There isn’t a better 50,000-foot view out there. He also admits to his mistakes, such as his disastrous purchase of Precision Castparts (PCC) in 2016 for $37 billion, which later suffered from the crash in the aerospace industry. In 2020, Buffet wrote off $11 billion of that acquisition. He can do worse. In 1993, he bought the Dexter Shoe Company for $433 million worth of Berkshire stock. The company went under, but the Berkshire stock today is worth $8.7 billion. Buffet’s letters always refer back to some of his “greatest hits,” today legends in the business history of the United States: GEICO, Furniture Mart, Berkshire Hathaway Energy, and See’s Candies, one of the largest employers of women in the US using 150-year-old recipes. Its peanut brittle is to die for. In 2009, Buffet snatched away from me BNSF for a song, now the most profitable railroad in the country, an amalgamation of 360 railroads over 170 years. I say “snatched away” because it was my favorite railroad trading vehicle for decades until he bought the entire company. I hear its trains run by my home every night as a grim reminder. Another benefit to owning (BRKB) is that Buffet is far and away the largest buyer of his own shares, soaking up $25 billion worth in 2020. And he is buying the shares of other companies that are also aggressively buying their own shares, like Apple ($200 billion with last year). It all sounds like the perfect money creation machine to me. It gets better. Berkshires “B” shares trade options, meaning you can buy LEAPS (Long Term Equity Anticipation Securities), which by now, you all know and love. I’ll run some numbers for you. With (BRKB) now trading at $254, you can buy the January 2023 $300-$310 call spread for $2.50. If the shares close anywhere over $310 by the 2023 expiration, the position will be worth $10.00, giving you a gain of 300%. And you only need an appreciation of $56, or 22% in the shares to capture this blockbuster profit, giving you upside leverage of an eye-popping 13.63X in the best run company in America. See, I told you you’d like it. This is how poor people become rich. In fact, my target for (BRKB) is $300 for end of 2021 and $400 for 2022, right when the two-year LEAPS expire. One question I often get about Berkshire is what happens when Warren Buffet goes to his greater reward, not an impossible concept given that he is 90 years old. I imagine the shares will have a bad day or two, and then recover. Buffet has been hiring his replacements for a decade or more, and he handed off day-to-day operation years ago (I didn’t want to move to Omaha, no mountains). When that happens, it will be the best buying opportunity of the year. And another chance to load up on those LEAPS. 
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Quote of the Day“Investing Illusions can continue for a surprisingly long time,” said Oracle of Omaha Warren Buffet. 
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DAIF
