Enduring the Pain in Spain

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There is no doubt that the crisis in Spain is getting worse, threatening to drag down the rest of Europe, and ultimately the US, with it. Over the weekend, Standard and Poor’s downgraded the debt of 11 Spanish banks, after downgrading the country’s sovereign debt weeks earlier. Further downgrades are a given so expect them in your regular Monday morning headlines. Expect more … [Read more...]

The Bombshells Headed Our Way

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This certainly promises to be an interesting week for the markets. On Thursday, we get the Department of Labor’s weekly jobless claims at 8:30 AM EST. If we clock a fourth consecutive week over 380,000, or go even higher, then an exact repeat for last year’s summer slowdown will be in play. So will the 25% drop in equity markets that followed. This will be confirmed by an … [Read more...]

Only Buy Companies You Hate

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Dilbert cartoonist Scott Adams argues that you should invest in companies you hate, because only the most unprincipled and rapacious firms make the greatest profits. Moral bankruptcy is a great leading indicator of success, and the best ones can get you to balance your wallet on the end of your nose and bark like a seal, as you buy products that you utterly despise. … [Read more...]

SOLD OUT! Last Chance to Sign up for the May 3, 2012 Scottsdale Strategy Luncheon

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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 Scottsdale, Arizona on Thursday, May 3, 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, foreign currencies, commodities, precious metals, and … [Read more...]

Coffee With the Treasury Secretary

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I knew that Treasury Secretary Tim Geithner was early for our meeting at the San Francisco Mark Hopkins Hotel, as the line of silver Secret Service GM Suburbans was illegally occupying some of the most prime parking places on Nob Hill. I’m glad they changed the color. I was getting tired of the perpetual black. Perhaps it’s an unknown leading economic indicator? As the agent … [Read more...]

No More QE3

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That was the judgment of the markets in the wake of the Federal Reserve’s latest economic forecast released today for at least two minutes. The asset classes most dependent on further monetary easing, like gold (GLD), silver (SLV), the Euro (FXE), and the yen (FXY), saw dramatic, sudden selloffs, and then recovered losses almost as fast. Blinked and you missed all the action. … [Read more...]

The Tax Rate Fallacy

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When anyone starts lecturing you that the US has the highest tax rate in the industrialized world, just turn around, walk away, and pretend you never heard of them. This person is either ignorant about this country's taxation system, or is deliberately trying to deceive or mislead you. According to a report released by the Internal Revenue Service, America's tax collection … [Read more...]

A Snapshot of America’s Native Indian Economy

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When I was remodeling my 160 year old London house, the chimney was in desperate need of attention. After the bricklayer crawled up the fireplace, he found a yellowed and somewhat singed envelope addressed to Santa Claus. Thinking it was placed there by my kids, he handed it over to me. In it was a letter dated Christmas, 1910 asking for a Red Indian suit. Europeans have … [Read more...]

Business is Booming at Ruff Times

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Following Howard Ruff for the last 35 years has always been eye opening, if not entertaining. The irascible Mormon is the publisher of Ruff Times (http://www.rufftimes.com  ), one of the oldest investment letters in the business, and one of the original worshipers of hard assets. The great thing about the end of the world crowd is that all of their trades are going … [Read more...]

Why Dr. Copper is Looking Ill

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Traders like to refer to the red metal as Dr. Copper because it is the only one that has a PhD in economics. This year it has been proving its credentials as a great predictor of future economic activity once again. Copper has been leading the downside charge for all risk assets since it peaked on February 10. After looking at the latest trade data for the red metal, it is … [Read more...]

Vietnam Has Been Hot

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Vietnam has delivered one of the top performing stock markets so far in 2012. Take a look at the Market Vectors Vietnam ETF (VNM). The venture invests in companies that get 50% or more of their earnings from that country, with an anticipated 37% exposure in finance, and 19% in energy. This will get you easily tradable exposure in the country where China does its … [Read more...]

Case Shiller Says the Bottom is Not In for Real Estate

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As much as my real estate broker insists that the bottom is in for residential real estate, the raw and unvarnished data still does not support that belief. This morning, the February S&P 500 Case Shiller real estate index put in new lows for nine major markets, as well as for both composite indexes. Overall, prices are down 3.5% YOY. That takes us back to Q3, 2002 levels. … [Read more...]

April 25, 2012 – Quote of the Day

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“With slowing growth in the US and no growth in Europe, you are going to have to shave a few percentage points off of growth in China. If you look at the chessboard as a retail investor, we have a year or more in a sideways to down stock market,” said Dr. Peter Navarro, a professor at the University of California at Irvine School of business. … [Read more...]

The Next Two Weekly Jobless Figures Are Crucial

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All eyes will be focused on the weekly jobless claims to be released by the Department of Labor at 8:30 AM EST on Thursday. You may recall that investors did not exactly run the last two weekly reports up the flagpole and salute them, which showed sharp increases in unemployment claims. At this point the bulls are being comfortably complacent, blaming the bad numbers on  … [Read more...]

Your Wealth and the French Election Results

Socialist party presidential candidate Françcois Hollande

It would be easy to ignore what is happening on the other side of the world, especially when they involve the French. But to do so today in this interconnected and interdependent world would be extremely hazardous to your wealth. When a butterfly flaps its wings in Brazil, the tsunami hits Japan. That is exactly the extreme sort of weather event we are witnessing today with … [Read more...]

China’s View of China

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I ran into Minxin Pei, a scholar at the Carnegie Endowment for International Peace. Who imparted to me some iconoclastic out of consensus views on China’s position in the world today. He thinks that power is not shifting from West to East; Asia is just lifting itself off the mat, with per capita GDP only at $5,800, compared to $48,000 in the US. We are simply moving from a … [Read more...]

Closing My Apple Position

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My Apple April $450-$480 call spread expired deep in the money at the close on Friday. Legally, these expire at midnight on Saturday night, so your broker won’t take these off your statement until the following Monday. The position should be zeroed out and you should receive a cash credit. You will also find that the margin requirement has disappeared. Your net profit on … [Read more...]

This is What a Lost Decade Gets You

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With all of the handwringing about the zero return on US equities for the last decade, I thought I'd better take a look at the long term charts. It's very clear that we have been trading in a gigantic sideways narrowing wedge for the last 18 years, defined by 14,000 on the upside and 6,000 on the downside. The clever investors out there, like hedge funds, have been selling … [Read more...]

China’s Coming Demographic Nightmare

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Thanks to China's “one child only” policy adopted 30 years ago, and a cultural preference for children who grow up to become family safety nets, there are now 32 million more boys under the age of 20 than girls. Large scale interference with the natural male:female ratio has been tracked with some fascination by demographers for years, and is constantly generating unintended … [Read more...]

April 23, 2012 – Quote of the Day

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“The US has repositioned itself better than any of its global competitors. Americans are doing what they do best. They’re adapting, they’re moving, they’re finding good, and they’re surviving. That’s where we need to be,” said Tom Barrack, CEO of Colony Capital, and a former principal of the Bass Group. … [Read more...]

The Race Towards the Year End Fiscal Cliff

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After spending all of this year ignoring the fiscal disaster that the US is facing at the end of 2012, markets are finally taking off the blinders. That might explain why the S&P 500 has dropped 4.3% so far from its April 1 peak and why it may have more to come. Remember the debt ceiling crisis of the summer of 2011? You know, the one that triggered a 25% collapse in US … [Read more...]

Another Alarm Bell

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I am a numbers guy. Show me the data and I’ll draw my own conclusions, ignoring conflicted brokerage research, the paid talking heads on TV, and all the politically motivated garbage pumped out by industry sponsored fake research institutes. I am also a glass half full kind of guy, willing to make a positive interpretation when all else is equal. After all, over the very long … [Read more...]

Who the Electric Car Helps and Hurts

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With gasoline prices staying stubbornly high, the number of hybrid and electric cars manufactured is soaring skyward. Toyota Motors (TM) is far and away the biggest beneficiary as the world’s largest manufacturer of hybrid cars with its Prius family that now extends to five models. Nissan Motors (NSANY) is expected to complete construction of a Tennessee plant that will produce … [Read more...]

April 20, 2012 – Quote of the Day

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“The biggest tumor that we are now facing for the economy is the shadow inventory of housing. We now have six million units that are delinquent, in default, or foreclosed, and 15 million other units for sale. Demographic demand can only soak up one million units a year. It is the biggest dilemma for homeowners,” said Tom Barrack, CEO of Colony Capital, and a former principal of … [Read more...]

SOLD OUT! Last Chance to Attend the San Francisco April 20 Strategy Luncheon

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Come join me for lunch at the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in San Francisco on Friday, April 20. An excellent meal will be followed by a wide ranging discussion and a 60 minute question and answer period. I’ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep … [Read more...]

Cheniere Energy (LNG) Gets the Green Light

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There is never any guarantee that a government agency will not do something idiotic. This time it didn’t, thankfully. The Federal Energy Regulatory Commission (FERC) granted the final license needed by Cheniere Energy (LNG) to build the first of two liquifaction plants at Sabine Pass on the Texas Louisiana border on the Gulf of Mexico. These will be the first such plants built … [Read more...]

Catch Me on Money Show TV

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At the Orlando Money Show in February I recorded three videos, which readers can watch for educational purposes. I cover the coming disaster in Japan, the current state of technology in electric cars, and the long term opportunities in India. They are only about five minutes in duration each. If you want to see how this newsletter has visibly aged me, have a look. At least I am … [Read more...]

Check Out These Interesting Charts

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I ran through a number of charts provided by my friends at Stockcharts.com, and as a person who has been piling on the shorts for the past two weeks I was greatly encouraged. Almost every single one was pregnant with gloomy implications. This is all happening a mere 12 days before the Great Escape in May commences. Virtually every technical indicator I follow is now flashing … [Read more...]

Checking Out the Dorsey Wright Technical Model

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Bill Good is a friend of mine who runs Bill Good Marketing based in Salt Lake City. His is one of the best firms out there that provides data base support for registered investment advisors and high net worth individuals to operate independently. To see his website, please click here at billgood.com. We were chewing the fat the other day about the long term consequences of … [Read more...]

The Technology Nightmare Coming to Your City

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I tell people at my strategy luncheons that living in the San Francisco Bay area is like living in the future. There is an explosion of high tech innovation going on here, and we locals often find ourselves the guinea pigs for the latest hot products. However, sometimes the future is not such a great place to be. I learned this the other day when I received a parking ticket … [Read more...]

Is France the Next PIIG?

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All eyes are now focused on Spain, where last week’s failed bond auction took yields back over 6% for ten year paper, and the pain is clearly not confined to the plain. But longer term focused analysts are wondering if France is really the next big over ripe piece of fruit to fall in Europe. Is France really a PIIG in sheep’s clothing? The structural economic data are not … [Read more...]

Turbulence at Boeing (BA)

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Boeing Aircraft (BA) is one of the great icons of American manufacturing, and also one of the country’s largest exporters. I was given a private, sneak preview of the new Dreamliner at the Everett plant days before the official launch with the public, and I can tell you that this engineering marvel is a quantitative leap forward in technology. No surprise that the company has … [Read more...]

An Afternoon With Boone Pickens

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Reformed oil man, repenting sinner, and borne again environmentalist T. Boone Pickens says that “When we turn the US green, it will have the best economy ever.” I met the spry, homespun billionaire at San Francisco’s Mark Hopkins on a leg of his self-financed national campaign to get America to kick its dangerous dependence on foreign oil imports. For the past 30 years, the … [Read more...]

China GDP Data Sends Bulls Fleeing

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The market hung on tenterhooks all last week, waiting for the Chinese Q1 GDP figure. As recently as Thursday, rumors swept the market that the number could be as high as 9%, well above the consensus figure of 8.4%, taking the Dow up a red hot 181 points. When the flash hit in the afternoon Beijing time confirming 8.1% the equity futures flipped into sell mode. By the time the … [Read more...]

Another Call From Texas

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I received another one of those scratchy, barely audible cell phone calls from my buddy at the Barnet Shale in Texas this morning. Cheniere Energy (LNG) is has obtained three of the four permits it needs to begin construction of a gas liquifaction plant in Louisiana. This will enable the company to export natural gas (UNG) to Asia, where it is selling for prices eight times … [Read more...]

Check Out These Cool Lightening Pics

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From my mountain top aerie in the Oakland Hills I had a front row seat to the spectacular lightning storm that hit San Francisco last week. I saw both towers of the Golden Gate Bridge get hit simultaneously. I just thought I would pass on some of the more amazing pictures. It is all part of life’s rich tapestry. Enjoy.     I'm at the second strike … [Read more...]

April 16, 2012 – Quote of the Day

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“The VIX right here is unsustainably low. I think China has more of a downside surprise. Analyst expectations for earnings are overly aggressive. There are just a few too many things that can go wrong out there,” said Vadim Zlotnikov, chief market strategist at Alliance Bernstein. … [Read more...]

Bidding Up the Market

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A few years ago, I went to a charity fund raiser at San Francisco’s priciest jewelry store, Shreve & Co., where the well-heeled men bid for dinner with the local high society beauties, dripping in diamonds and Channel No. 5. Well fueled with champagne, I jumped into a spirited bidding war for one of the Bay Area’s premier hotties. Suffice to say, she has a sports stadium … [Read more...]

Budget Cuts Hit the Wild Animal Market

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In case you missed it, the second hand animal market has crashed. Forced to slash budgets by cash starved municipalities, the nation’s public zoos have been paring back their collections of living exhibits. The Washington Zoo is trying to offload a 7,000 pound hippopotamus; while the San Francisco Zoo is short some tigers after one ate a visitor and had to be shot. The … [Read more...]

Dinner With Elliot Spitzer

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I couldn’t for the life of me figure out why New York’s former governor and federal prosecutor, Elliot Spitzer, wanted to invite me to dinner. He wasn’t flogging a book or promoting a movie, and he certainly wasn’t running for office again. But I went anyway, thinking perhaps the notorious “Client No.9” might let me peek at his famous black book. Elliot, who showed up … [Read more...]

April 13, 2012 – Quote of the Day

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“People that have complete disdain for government intervention in the economy and markets of the West have complete faith in nine guys in a room being able to figure out the very complex and rapidly growing Chinese economy,” said hedge fund manager Jim Chanos of Kynikos Associates, about foreign investors’ unlimited faith in the Middle Kingdom’s politburo … [Read more...]

Date, Don’t Marry Those Short Positions

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Note to self. Don't do your midnight pee next to the bear box. They're called that for a reason. And I'm sorry that my shouting at the hungry, six foot tall black bear standing in front of me, no doubt attracted by my Cheetos, hot dogs, and marshmallows, woke up the campers at the 57 surrounding sites. Of course it was too dark to find my bear spray. My ursine challenger … [Read more...]

Taking profits on Apple

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I am getting a lot of emails about how to come out of the $450-$480 Apple bull call spread, which I advised readers to go into on March 2. Now that we are deep in the money, what is the best way to take a profit? Well, the first thing for me is to say congratulations. My expectation that Apple stock would continue grinding up has paid off handsomely. The entire position … [Read more...]

April 12, 2012 – Quote of the Day

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My problem with the stock market is that I fail to see who the incremental buyer will be to take the S&P 500 to 1,500. It’s not going to be the retail investor who has been hit with a 34% drop in home prices, two market crashes in the last decade, and a flash crash while their incomes are not keeping up with inflation. The last thing on their minds right now is to buy … [Read more...]

The QE3 Myth

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The prospect of a runaway printing press at the Federal Reserve has been the overwhelming factor driving risk assets in 2012.  Being the sober, cautious guy that you all know me to be, I did not join the party. I tell people this is because if I lose all my money I am too old to start over again as an entry level trader at Morgan Stanley. There is the additional complication … [Read more...]

America’s Demographic Time Bomb

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You can never underestimate the importance of demographics in shaping long term investment trends, so I thought I’d pass on these two highly instructive maps. The first shows a map of the world drawn in terms of the population of children, while the second illustrates the globe in terms of its 100 year olds. Notice that China and India dominate the children’s map. Kids turn … [Read more...]

Looking for Shorting Opportunities Among the Homebuilders

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As we continue flirting with a final top in equities for the year, I am stepping up my search for the best ways to participate on the downside. At the very top of the list are the homebuilders, one of the top performing sectors since the October, 2011 bottom. The performance of individual names has been absolutely blistering, with Pulte Homes (PHM) clocking a 245% move to the … [Read more...]

Testimonial

Overworked2-8

I just wanted to thank you for some great trades. Thanks to you, I was profitable on the (IWM) put trade and it certainly looks like the Apple credit spread will return a nice profit (the profit you defined). Your wisdom in the market has been a godsend to my portfolio and my family. You stand apart from the field in your expertise in the markets. Thank you, Thank you, Thank … [Read more...]

Payroll Bombshell Give Market Technicians Heart Attack

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I am sitting here on Easter weekend sifting through pages and pages from the various technical programs I follow warning that the roof is about to cave in on the stock market. Friday’s nonfarm payroll bombshell was dropped right at a key, make or break level for the S&P 500 and the Dow Average. Hold here, and we grind to a marginal new high in weeks. Fail, and it is all … [Read more...]

Cross Asset Class Analysis Warned “RISK OFF” Was Coming

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Last week saw a dramatic deterioration in the economic data that has been the foundation of the Great Bull Market of 2012. First, we read minutes from a Federal Reserve meeting suggesting that QE3 has been put on a back burner. Then the Department of Labor’s Friday nonfarm payroll report poured gasoline on the fire, coming in at 120,000, versus an expected 210,000. Until … [Read more...]

Trolling for Short Sale Candidates at Market Tops

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Fear of law suits prevents most analysts from publishing lists of short selling targets. But the GMI Ratings, Inc., a forensic accounting firm, regularly posts lists of public companies they believe may go bankrupt (see http://www.auditintegrity.com ). Many of their picks reflect the accelerating shift from the old economy to the new economy. With offices in New York and Los … [Read more...]

Has Gold Had It?

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With the Federal Reserve signaling yesterday that QE3 is off the table, many traders are now betting that the barbarous relic is about to take a prolonged vacation. Without a dividend or an interest yield in a world desperate for cash flow, the yellow metal suddenly doesn’t have so much to offer. Take away the fear of inflation that our deflationary reality assures, and gold … [Read more...]

Beating the Market With Demographics

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Regular readers of this letter know that I rely on long term demographic trends to predict the direction of global financial markets. Let me approach this topic from a different angle, measuring the number of retirees a population must support versus the anticipated burden in 20 years, and its implications. I start with the basket cases. Japan’s problems on this front are … [Read more...]

Apple Joins the Establishment

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I was more than amused when technology analyst superstar, Piper Jaffray’s Gene Munster, put out his own forecast that Apple (AAPL) would reach $1,001. Munster made the call after conducting a survey that showed that 40% of students plan on buying an iPhone in the next 6 months, while 19% of non-tablet owners plan on purchasing a tablet in the next 6 months.The shares responded … [Read more...]

If You Sell in May and Go Away, What to do in April?

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That is the conundrum facing traders, investors, and individuals as we enter the new quarter. For some hedge fund managers, Q1, 2012 was clearly the quarter from hell. I have been in the market for four decades, long enough to collect an encyclopedia worth of words of wisdom. One of my favorites has always been “Sell in May and Go” away. On close inspection you’ll find there … [Read more...]

Onshoring: the New Global Trend

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By now, we have all become experts in offshoring, the practice whereby American companies relocate manufacturing jobs overseas to take advantage of low wages, missing unions, the lack of regulation, and the paucity of environmental controls. The strategy has been by far the largest source of new profits enjoyed by big companies for the past decade. It has also been blamed for … [Read more...]

Double Dipping on the Yen

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You know how I love second helpings, especially when the sushi bar is involved. I especially like unagi, or cooked eel, which is said to be an oriental aphrodisiac. I am going to take advantage of Japan’s fiscal year end book closing on March 30 to reenter my short position of the Japanese yen. This is the one time a year when Japanese corporations suddenly repatriate yen … [Read more...]

Where to Play From the Short Side

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This time I am going to start with the fundamental argument first, then follow up with the Trade Alert. We are getting perilously close to a substantial pull back in global risk assets. While this has already started in commodities, the ags, oil, copper, and precious metals, we have yet to see the whites of their eyes in equities. I believe at these levels stocks are the … [Read more...]

Taking a Peak at China

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The handful of Chinese army officers I huddled with in the underground bunker all stared intently at their watches. Three, two, one, and then KABOOM! At exactly 12:00 noon, the blast of distant artillery sent a five inch shell screaming over our heads and exploded into the hill above us. The ground shook under our feet, causing dust to drift down from the concrete ceiling above … [Read more...]

April 2, 2012 – Quote of the Day

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“It's very difficult to navigate a business through a paradigm shift. You must hard wire your system to second guess all the time, questioning what is next, and then what is next. You've got to retain optionality for both investment portfolios and the business your run to navigate this well,” said Mohamed El-Erian, co-chairman of the bond house PIMCO. … [Read more...]