The Looking Glass Market

alice

If you feel like this market has sucked you down a rabbit hole, you have plenty of company. I have never seen such a profusion of contrary cross market indicators. Traders are running up shares prices while companies are cutting earnings forecasts. Economists are raising GDP forecasts as rising energy prices are taking them the opposite direction. Natural gas is crashing as … [Read more...]

Taking a Bite Out of Stealth Inflation

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When I visited the local Safeway over the weekend, I was snared by some uniformed pre-teens, backed by beaming mothers behind a card table selling Girl Scout cookies. I was a pushover. I walked away with a bag of Thin Mints, Lemon Chalet Creams, Do-Si-Dos, and Tagalongs. I have to confess a lifetime addiction to Girl Scout cookies. During the early eighties, one of the … [Read more...]

It’s All About the Euro

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Wednesday will be all about the Euro. That is the day that the European Central Bank announces the result of the next tranche of its quantitative easing program, the LTRO, or Long Term Financial Reorganization policy. This is the program that allows European banks to borrow unlimited funds at 1% with no questions asked. This is very important for all asset prices worldwide, … [Read more...]

Check Out Obama’s Latest Stimulus Package

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There is no limit to how far president Obama is willing to go to stimulate the economy and reassure his election. So I had to be amused when a friend sent me a link to his latest proposal. Warning: the source is a college humor website, so I would take it with so many grains of salt. For a good laugh, click here. Fellow writers should be prepared for the worst. The economy will … [Read more...]

February 29, 2012 – Quote of the Day

tennis

I don’t know that the retail investor matters anymore. They didn’t come back to the market after the 2000 crash. The idea that the individual investor believes in the stock market now is challenged. We have a market that is increasingly institutional investors trading back and forth with each other”, said Dan Greenhouse, chief global strategist at BTIG. … [Read more...]

Tesla Leaps Into the Future With Its New Model X

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Elon Musk certainly came up with a winner with his unveiling of Tesla’s Model X on February 9. When I first heard the specifications of Tesla’s new Model X, I was floored. The all- electric vehicle offers four wheel drive. It has spacious seating for seven. It accelerates from zero to 60 miles per hour in 4.4 seconds, a faster jackrabbit sprint than you’ll find in a Porsche … [Read more...]

Rampant Wage Inflation Strikes China

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I rely on hundreds of 'moles' around the world whose job it is to watch a single, but important indicator for the world economy. One of them checks for me the want ads in the manufacturing mega city of Shensen, China, and what he told me last week was alarming. Wage demands by Chinese workers have been skyrocketing this year. The biggest increases have been at the low end of … [Read more...]

Coincident Economic Data Says Market is Topping

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This is one of the most bizarre markets I have ever seen. The worse the economic outlook gets, the higher the market goes. But it doesn’t breathe like a normal market, with plenty of corrections along the way giving traders a chance to get in. It has been a straight line up with nary a pullback, trapping many players on the sidelines. But it has been going up so slowly that … [Read more...]

The Mad Hedge Fund Trader’s Long Term Model Portfolio

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I am frequently asked to propose a long term portfolio that investors can just buy and forget about. They have no interest in sitting on the edge of their seat waiting for my next trade alert, staying up all night to catch the European opening, or scanning every wire service headline to glean a momentary trading edge. I have put together a model portfolio that achieves … [Read more...]

February 27, 2012 – Quote of the Day

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“From an economic standpoint, it is very hard to argue against the idea that the economy is gaining some steam here. A lot of those negative beliefs are starting to turn, such as credit. The upside risks to equities are greater than the downside risks”, said Dan Greenhouse, chief global strategist at BTIG. … [Read more...]

And the Winner is: Ron Paul!

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Not just the stock market has been rallying strongly since October. So have the fortunes of President Obama. Since the onset of the current bull move, the likelihood of him winning the next election has risen from the high thirties to the low fifties, according to the Associated Press GfK poll. If you want to put your money where your mouth is, the online site, Intrade (click … [Read more...]

Will the Fall in Jobless Claims Hit a Wall?

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If I were trapped on a desert island and could pick only one economic data release to float ashore in a bottle, it would doubtless be the weekly jobless claims. Released by the Department of Labor every Thursday morning at 8:30 EST, this one number is the most accurate leading indicator of future economic activity among the hundreds out there to choose from. If you don’t … [Read more...]

A Cow based Economics Lesson

HappyCow

SOCIALISM You have 2 cows. You give one to your neighbor. COMMUNISM You have 2 cows. The State takes both and gives you some milk. FASCISM You have 2 cows. The State takes both and sells you some milk. NAZISM You have 2 cows. The State takes both and shoots you. BUREAUCRATISM You have 2 cows. The State takes both, shoots one, milks the other, and then … [Read more...]

My Favorite Stock to Short

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Troubled Bank of America (BAC) certainly earned its title as the premier Dog of the Dow last year. It managed an appalling 58% decline in 2011, the worst of any of the 30 Index stocks. It only managed to stay above the crucial $5 level by a hair’s breadth, below which many pension funds are barred from owning shares. Since the beginning of this year, it has been the best … [Read more...]

How to Avoid the Ponzi Scheme Trap

bernie madoff

I spent a sad and depressing, but highly instructional evening with Dr. Stephen Greenspan, who had lost most of his personal fortune with Bernie Madoff. The University of Connecticut psychology professor had poured the bulk of his savings into Sandra Mansky's Tremont feeder fund; receiving convincing trade confirms and rock solid custody statements from the Bank of New … [Read more...]

China Joins the Quantitative Easing Club

Chinese soccer players sprint during their training session for the upcoming AFC Asian Cup soccer tournament in Kuala Lumpur

The other shoe has fallen in China, with the People’s Bank of China’s move to cut bank reserve requirements by 50 basis points, the second time since November. The relaxation makes the Middle Kingdom a certified, card carrying member of the international quantitative easing club.  It also confirms the country’s time tested preference for announcing major economic policy changes … [Read more...]

Risk Control for Dummies

200day

Whenever I change my positions, the market makes a major move, or reaches a key level, I look to stress test my portfolio by inflicting various scenarios upon it and analyzing the outcome. This is second nature for most hedge fund managers. If fact, the larger ones will use top of the line mainframes powered by $100 million worth of in-house custom program to produce a real … [Read more...]

Nikkei Shows the Yen Move is Real

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The Bank of Japan renewed its membership in the international quantitative easing club last week, announcing that it was substantially expanding its bond repurchases. Specifically, it will increase them from ¥55 trillion to ¥65 trillion, a jump equivalent to $830 billion. To understand how big this is, consider that Japan’s GDP is one third the size of the US. That would be … [Read more...]

An Evening With General Douglas Fraser

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I never cease to be amazed by the intelligence provided me by the US Defense Department, which after the CIA, has the world’s most impressive and insightful economic research team. There are few places a global strategist like myself can go to get an intelligent, thoughtful forty year views, and this is one. Of course, they are planning how to commit ever declining resources … [Read more...]

My Very Last Chance to Buy My Trade Alert Service at the Old Price

Overworked2-8

Due to a number of technical difficulties, many potential new subscribers were denied the opportunity to buy my award winning Trade Alert Service at the old price of $1,997 before the price increase. Among other things, the site crashed a few times because of the sheer volume of people attempting to sign up at once. Since I highly value loyalty, I am therefore offering this … [Read more...]

The Long View on Emerging Markets

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I managed to catch a few comments in the distinct northern accent of Jim O'Neil, the fabled analyst who invented the 'BRIC' term, and who has been kicked upstairs to the chairman's seat at Goldman Sachs International (GS) in London. Jim thinks that it is still the early days for the space, and that these countries have another ten years of high growth ahead of them. As I … [Read more...]

Murray Sayle: The Passing of a Giant in Journalism

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I was saddened to hear of the death of my close friend, the Australian, Murray Sayle, after a long battle with Parkinson's disease at the age of 84. Murray was one of the giants of journalism in the second half of the 20th century. He started by editing the newspaper at University of Sydney, where his incendiary opinions got him expelled from school. It seems there was a … [Read more...]

Use Apple Timing to Short Bank of America Stock

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There is a method to my madness. It’s all about Apple (AAPL). A disproportionate share of the market volume has been pouring into Apple shares for the past two weeks. The higher it went, the more people wanted to buy. Just in the past week, the company has tacked on a staggering $75 billion in market capitalization. The action in the call options has been absolutely … [Read more...]

Catching Up With Occupy Wall Street

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I arrived early for a meeting in Salt Lake City the other day. I noticed a cluster of tents near the ice skating rink and thought I would catch an update on the Occupy Wall Street movement. Two guys emerged from a jerry built, homemade structure and braved the frigid 20 degree temperatures to find out what I was all about. I said I was a card carrying member of the 1% and … [Read more...]

February 16, 2012 – Quote of the Day

TIG

“When you talk to private clients, they are nowhere near putting money into equities yet. You can’t even get them to understand dividend growth, let alone buying equities, because they are still worried about losing money. People are going to be very emotional. This is going to be a year of volatility until proven otherwise,” said Brian Belski, chief investment strategist at … [Read more...]

Join Me on the Queen Mary 2 for My Seminar at Sea – July 11, 2012

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Come join me in the grand appointments of the Cunard Line’s flagship, the elegant and spacious Queen Mary 2, on an eastbound transatlantic cruise. The Ship departs New York at 5:00 PM on July 6, 2012 and arrives at Southampton on July 13. There I will be conducting the Mad Hedge Fund Trader’s Strategy Update, a three hour discussion on the global financial markets. I’ll be … [Read more...]

Industries You Will Never Hear From Me About

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The focus of this letter is to show people how to make money through investing in fast growing, highly profitable companies which have stiff, long term macroeconomic winds at their backs. That means I ignore a large part of the US economy whose time has passed and are headed for the dustbin of history. According to the Department of Labor's Bureau of Labor Statistics, the … [Read more...]

Global Trading Dispatch Hits 64%, 11 Day Home Run On Yen Short

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When I covered my short position on the Japanese yen on Friday, it was not because I suddenly fell in love with the Land of the Rising Sun, began each day with a Zen meditation, started eating sushi three times a day, or initiated writing this letter from a hot tub. It is because followers of my Trade Alert Service suddenly had an 11 day, 64% gain on their hands. We now live in … [Read more...]

Here Comes the Next Peace Dividend

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When communications between intelligence agencies suddenly spike, as has recently been the case, I sit up and take note. Hey, do you think I talk to all of those generals because I like their snappy uniforms, do you? The word is that the despotic, authoritarian regime in Syria is on the verge of collapse, and is unlikely to survive more than a few more months. The body count … [Read more...]

The Real Estate Market in 2030

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A number of analysts, and even some of those in the real estate industry, are finally coming around to the depressing conclusion that there will never be a recovery in residential real estate. Long time readers of this letter know too well that I have been hugely negative on the sector since late 2005, when I unloaded all of my holdings. However, I believe that 'forever' may be … [Read more...]

Who Says Hedge Funds Aren’t Adding Value?

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According to my old friend, Rick Sopher, chairman of LCH Investments in London, the top ten hedge funds have earned $153 billion for their investors since inception. Rick, who runs his business from an elegant flat on posh Eaton Square, compiled the list after a comprehensive survey of the still operating 7,000 hedge funds worldwide. It is dominated by marquee names like … [Read more...]

China’s Long and Winding Road

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I spent the evening speaking to Gao Jie, a Beijing civil judge who left the bench to join China's growing environmental movement when her kids came home from school one day coughing and wheezing. You only have to inhale in the capitol city these days to understand that they have a huge problem there. One of the dirty little secrets of international trade for the last three … [Read more...]

Getting Something for Nothing

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I just contracted to buy all the gasoline I want at 14 cents a gallon. No, I have not struck oil in my backyard, or come into an inheritance from a long lost Kuwaiti relative. That is the de facto price that PG&E is billing me for a full charge on my all-electric Nissan Leaf. That works out to $1.20 to recharge a vehicle that will transport me 80 miles, at the price of … [Read more...]

They’re Not Celebrating in Celebration

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I am in Orlando, Florida today to appear as the Keynote speaker at the 2012 Money Show. A search for a nearby bank took me to the surreal suburb of Celebration, a city developed by the Disney people during the mid-1990's. Created to evoke small town USA circa 1940, the berg tastefully replicates an America from the bucolic past, with wide parks, period street lights, white … [Read more...]

Dinner With Joseph Stiglitz

GREENSPAN MESS

The great thing about interviewing Joseph Stiglitz over dinner is that you don't have to ask any questions. You just turn him on and he spits out one zinger after another. And he does this in a kibitzing, wizened, grandfatherly manner like one would expect from a character that just walked off the set of Fiddler on the Roof. The unfortunate thing is that you also don't get … [Read more...]

The One Bright Spot in Real Estate

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After my weekly dump on residential real estate, I feel obliged to reveal one corner of this beleaguered market that might actually make sense. By 2050 the population of California will soar from 37 million to 50 million, and that of the US from 300 million to 400 million, according to data released by the US Census Bureau and the CIA fact Book (check out the population … [Read more...]

A Short History of Hedge Funds

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Legendary Fortune Magazine editor, Winslow Jones, created the first hedge fund out of a shabby office on Broadway Avenue in New York City in 1948, and generated monster returns over the next 20 years. He got the idea of a 20% performance bonus, now an industry standard, from ancient Phoenician sea captains who kept a fifth of the profits from successful voyages. Jones must have … [Read more...]

The ‘Population Bomb’ Echoes

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Pack your portfolios with agricultural plays like Potash (POT), Mosaic (MOS), and Agrium (AGU) if Dr. Paul Ehrlich is just partially right about the impending collapse in the world's food supply. You might even throw in long positions in wheat, corn, soybeans, and rice. The never dull, and often controversial Stanford biology professor told me he expects that global warming … [Read more...]

Only Hours Left to Beat My Price Increase

Overworked2-8

Due to the overwhelming surge in new subscriptions last night, my website crashed, preventing many subscribers from renewing at the old $1,997 annual rate BEFORE THE February 7 deadline. I am therefore extending my special offer for just 24 more hours. After that, at midnight EST, Wednesday February 8, prices for both of my products are rising by 50%. It is an old adage in … [Read more...]

SOLD OUT: Houston Strategy Luncheon – February 9, 2012

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Come join me for lunch for the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in Houston, Texas on Thursday, February 9, 2012. A three course lunch will be followed by a PowerPoint presentation and an extended question and answer period. I’ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real … [Read more...]

Earnings are Slowing as the Market is Peaking

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Just as portfolio managers are buying shares because the stock market is going up, the fundamental argument behind higher equity prices is starting to erode. As the totals are coming into focus for the Q4 earnings period, disappointment is becoming the order of the day. Of the 291 S&P 500 companies that have reported so far, 165 have beat estimates, 92 matched, and 34 … [Read more...]

February 7, 2012 – Quote of the Day

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'Changes in consumption stemming from per capita income rises from $1,000 a year to $5,000, as you are seeing in India, or $5,000 to $10,000, as you are seeing in China, is a very different kind of consumption. It is much more commodities heavy, it is food heavy, it draws a lot more on water supplies,' said Ian Bremmer, president of the Eurasia Group, an New York Based think … [Read more...]

Rumblings in Tokyo

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I spent ten years of my life tramping in and out of Japan’s Ministry of Finance headquarters in Tokyo’s Kasumigaseki district. It was a dreadful reinforced steel and concrete affair with a dull grey tile siding that was so solidly built that it was one of the few structures in the city to survive WWII. But the building offered spacious prewar dimensions, and I never tired of … [Read more...]

The Nonfarm Payroll Shocker

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Economists were left speechless with Friday’s report of the January nonfarm payroll, which came in at an amazing 243,000, more than double the consensus expectations. It was the sharpest improvement in the data since April. Analysts have become inured to bad data that a mediocre report sounds like The Second Coming. The headline unemployment rate plunged from 8.5% to 8.3%, … [Read more...]

Time to Short the Yen Again

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The Japanese yen has been flat lining since the tsunami struck in March of last year and was quickly followed by the nuclear meltdown and an economic collapse. In the meantime, the country’s long term structural problems have gotten steadily worse. Last week, the yen was driven back to the very top of the range with a modest “RISK OFF” trade in the global financial markets … [Read more...]

Global Trading Dispatch Scores Two Day 75% Gain

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Finally, all that driving down dusty, bumpy, washboard dirt roads in the Barnet Shale in Texas paid off. The thing about a great trade is that when it works, new reasons to justify it that you never thought of suddenly come out of the woodwork. That is exactly what happened with my decision to sell short natural gas two days ago. That unloved molecule, CH4, cratered this … [Read more...]

Testimonial

Overworked2-8

My name is Julian and I am currently a finance student in Montreal, Canada. I've been reading some of the free material you've posted and I think you are dead on with your analysis. It’s really good stuff. I've been trading for 4 years and turned $3000 into $17000. It’s paying my way through college. Wishing you continued success in 2012. Julian Montreal, Canada … [Read more...]

Farewell to the Wealth Insider Alliance

Overworked2-8

All good things must come to an end, and it is time for me to bid adieu to the Wealth Insider Alliance. There is no doubt that this innovative and aggressive online marketing firm played a major role in placing the Mad Hedge Fund Trader on the map in the virtual world. They acted as the able midwives to the birth of my Macro Millionaire Trade Alert Service. One of the most … [Read more...]

Time to Short Natural Gas Again

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Long term readers are well aware of my antipathy towards natural gas, which has been in your worst nightmare of a bear market for the past three years. Well, the simple molecule finally got some good news last week. First, major producer, Chesapeake Energy (CHK) announced that it was cutting its natural gas production by 50%, taking some immediate pressure off the market. … [Read more...]