Are We Probing a Bottom With Housing?

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The March Case Shiller Home Price Index is out, showing that the fall in home prices continues unabated, paring -2.6% on a YOY basis. Detroit delivered the biggest drop, down a shocking -4.4%, followed by Chicago (-2.5%), and Atlanta (-0.9%). But 14 out of 20 markets managed increases in prices. The national index is still declining, but at a slower rate. Given that this … [Read more...]

Dinner With Labor Secretary Robert Reich

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I never resist a dinner invitation from Bill Clinton’s Secretary of Labor, Robert Reich. A Rhodes Scholar who dated Hillary Clinton at Yale, he unsuccessfully ran for governor of Massachusetts against Mitt Romney, and authored 13 books. Bob is never without an original thought, nor a stranger to controversy. Today he didn’t disappoint. On top of that, he is about the funniest … [Read more...]

My Tactical View of the Market

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The abject failure of the equity indexes to breach even the first line of upside resistance does not bode well for the “RISK ON” trade at all. Only a week ago I predicted that the markets would be challenged to top 1,340 in the (SPX) and $78 for the Russell 2000 (IWM). In fact, we made it up only to 1,335 and $77.90 respectively. To see the melt down resume ahead of the … [Read more...]

Apple Redux

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The news out this morning that Apple (AAPL) may launch its HD television product in time for the Christmas holidays caused a nice pop in the stock this morning, so I thought I would quickly review the fundamental case behind owning the company. The story originated from rumors in China that its main manufacturer, Foxcon, had already placed orders for key component parts. It … [Read more...]

Time to Buy JP Morgan

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This is far and away the world’s premier banking institution. Estimates of the huge trading losses by the London “whale”, initially pegged at $2 billion, have since skyrocketed to $6 billion. I’ll ignore the Internet rumors that speculate about a $30 billion hickey. As you well know, almost everything on the net is not true, except what you read in my own newsletter. Back in … [Read more...]

What Hot…and Not

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My friend, Tom Dorsey of the technical research boutique Dorsey Wright, inundates me daily with a never ending stream of market sensitive data which has been helping me make some of my more successful market calls. For example, when the S & P 500 hundred broke 1,380 in April, he completely nailed the 1,280 bottom in the current move. So, I thought I’d pass on the asset … [Read more...]

Playing at the Deep End With the Euro

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I never wanted to join any club that would have me as a member. That is the little nugget of wisdom comedian Groucho Marx imparted to me during his visit to the UCLA campus 40 years ago. It is also what came to mind when I saw the shocking Commitment of Traders Report for Euro futures that came out last Friday. Short positions in the beleaguered European currency soared to … [Read more...]

My Tactical View of the Market

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The easy money has been made on the short side this year for a whole range of asset classes. While we will probably see lower lows from here, the risk/reward ratio for taking short positions in (SPX), (IWM), (FXE), (FXY), (GLD), (SLV), (USO), and (CU) are less favorable than they were two months ago. Of course, the ultimate arbiter will be the news play and the economic data … [Read more...]

Get Your New Global Trading Dispatch Password

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Paid up subscribers to Global Trading Dispatch and the Diary of a Mad Hedge Fund Trader newsletter are entitled to a password that gives them access to my premium content. Without it you will be unable to access the best parts of the new website, including my daily real time trading portfolio, trade alert tutorial and user’s manual, my Review of 2011, 2012 Outlook, and live … [Read more...]

Dinner With Nobel Prize Winner Paul Krugman

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The first thing I noticed when Paul walked in was the few extra pounds and silvery tinge to his hair he acquired since I saw him last. He’s clearly spending too much time behind a computer writing those acidic columns for the New York Times. We’re all short dated options in the end, I thought. We met at my favorite San Francisco restaurant, Gary Danko’s (click here for their … [Read more...]

Japan Downgrade Sends Yen Reeling

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The next step has been taken in the coming Japan crisis. American ratings agency, Fitch, has downgraded Japanese government debt to A+, with a negative outlook. The move cut the knees out from under the country’s dubious currency, sending it down sharply. Fitch expects the country’s debt to reach a nosebleeding 240% of GDP by year end, far and away the largest of any major … [Read more...]

Why My Boeing Trade Crashed and Burned

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This trade was an unmitigated disaster, and hopefully it will be the worst of the year. I’m glad we had one of these because it provides a wonderful opportunity to illustrate everything that can go on with a trade. Every loss is a learning opportunity, and a loss not learned from is an opportunity wasted, and dooms one to repetition. Let me count the ways: 1) I was too … [Read more...]

Don’t Miss the May 23 Global Strategy Webinar

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My next global strategy webinar will be held on Wednesday, May 23 at 12:00 noon EST. I’ll be giving you my updated outlook on stocks, bonds, commodities, currencies, precious metal, and real estate. The goal is to find the cheapest assets in the world to buy, the most expensive to sell short, and the appropriate securities with which to take positions. I will also be opining on … [Read more...]

Facebook Flop Frustrates Ferocious Fans

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This had to be one of the greatest change of life weekends in human history, endured by one Mark Zuckerberg. On Friday, he earned $9.2 billion with the flawed Facebook (FB) flotation. On Saturday, he married a Chinese doctor and longtime girlfriend, Pricilla Chan. Then on Monday, oops honey, I lost $1.2 billion. Talk about a rocky start! Never mind that the precise timing was … [Read more...]

Testimonial

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Holy Cow! Somehow I missed the May 4 trade alert about selling the (GLD) June $160 puts at $3.40 -- guess I didn't scroll up far enough on the ol' iPhone and only saw the alerts about (FXY) and (FXE) that day. And how happy am I that this happened, keeping me in the (GLD) puts until this morning, when I sold them at $11.15? VERY VERY HAPPY! While I was enjoying seeing the … [Read more...]

I Told You to Buy Mongolia!

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The global resource frenzy has grown so heated that money has begun pouring into the marginal fringes of the universe. The Mongolian stock market has been one of the world’s best performers over the last three years, posting two back to back 100% gains. I have been pounding the table on Mongolia for over three years now, as the fundamentals were stacking up nicely for it to … [Read more...]

Wal-Mart Is on Safari for Customers in South Africa

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It looks like the next ‘blue light special’ will be offered in South Africa (EZA), (AFK) Apparently, the retail giant, Wal-Mart (WMT), got the memo that the country is a great place to invest (click here for ‘On Safari for Trades in South Africa’). It’s $4.3billion bid for retailer Massmart is a huge vote of confidence for that emerging nation. My old friend, Carl Van Horn, … [Read more...]

Dr. Paul Ehrlich on the Population Bomb

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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 (WEAT), corn (CORN), soybeans (SOYB), and rice. The never dull, and often controversial Stanford biology professor told me he expects … [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...]

The ‘Friday-Monday Effect’ Exposed

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Dennis Gartman, of the ever interesting The Gartman Letter, published an interesting analysis on the 'Monday-Friday' effect. If you bought every Friday close last year and sold the Monday close, your return would have been 14.20%, versus a 0.42% return on the S&P 500 (SPX). Virtually all the gains would accrue at the Monday morning gap opening. If you did the reverse, … [Read more...]

A Chat With Bill Clinton

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I opened the e-mail at my usual wake up time of 4:00 am. President Bill Clinton was playing with Tiger Woods at the Presidents’ Cup PGA tournament at the Harding Park Golf Course in San Francisco today. Would I have time for a chat about US economic policy afterwards? That afternoon, in walked Bill, sunburned from his morning on the links, to chew the fat with some Bay Area … [Read more...]

Testimonial

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I took advantage of an offer to subscribe to your service in early April and in Mid April of this year, received and executed on the Trade Alerts to buy puts on Boeing, IWM, FXE and GLD. Today, May 16th, I followed up on the trade alert and closed the GLD put position with a return of 155%. Overall, on the remaining positions in IWM, BA and FXE I have a 17% return however that … [Read more...]

Risk Reduction Alert

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For those who wisely ignored my advice to sell the SPDR Gold Trust Shares ETF (GLD) June $160 Puts on May 3, good for you. The options are now trading at $10.50 and you have a profit of 147%, adding 14.7% to your annual return. This will no doubt be your home run trade of the year. If you still have these, it is time to give thanks for your good fortune and head for the … [Read more...]

A Conversation With Charles Nenner

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  I managed to catch my longtime friend, technical analyst, Charles Nenner, on the fly between London appointments yesterday. The must go to guy for big hedge funds, family offices, sovereign wealth funds, and high net worth individuals, says that the global markets are on the verge of completing round one of a major risk off trade, and there is much more to come. A … [Read more...]

Charts Are Breaking Down All Over

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They say a picture is worth a 1,000 words, so here are 4,000 words worth. My friends at www.stockcharts.com put together this series of charts establishing beyond any reasonable doubt that the “RISK ON” trade is breaking down across all asset classes. Everything is breaking down, simultaneously and in unison, including the S&P 500 (SPX), Gold (GLD), Silver (SLV), Oil … [Read more...]

The Energy Revolution on Our Doorstep

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A major plank in my golden age scenario for the 2020’s is the collapse of the cost of energy. This won’t occur because of a single big discovery, but from a 1,000 small ones that aggregate together to create a leveraged effect. The upshot is that we may be free of OPEC in 3-5 years, and completely energy independent not long after that. The impact on financial markets and … [Read more...]

Strong Dollar Spells Death for Commodities

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Panic is on deck, to use the baseball terminology that my foreign readers are often attempting to decipher. That is the only conclusion one can reach after getting gob smacked by the price action this morning. Copper got spanked for eight cents, oil burned $2, gold shed another $26, and silver puked 70 cents. The tantrum like stock behavior in producing and equipment … [Read more...]

ETF Scam of the Week

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When I heard that the managers of exchange traded funds were raking in huge fees from lending out shares in their index portfolios I thought “That’s great, the managers are really working hard to maximize returns for their shareholders.” These shares are borrowed by hedge funds which then then sell short. Then I found out the ugly truth. I was horrified to learn recently … [Read more...]

The Zhanjiang Kids Organization

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I follow a broad range of unconventional, but highly useful leading economic indicators that gives me a decisive edge when predicting the future direction of global financial markets. One of them has started flashing a warning sign. I fund an orphanage in remote Zhanjiang, in China’s southern Guangdong province near Hainan Island called The Zhanjiang Kids Organization that … [Read more...]

The Tip of the Iceberg

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JP Morgan (JPM) just gave us the preview of the next financial crisis. A surprise, hidden $2 billion trading loss in esoteric foreign derivatives at on offshore branch by America’s premier bank is exactly what the markets did not want to hear right now. The London whale has beached itself. Although no one has mentioned this, these are exactly the same sort of securities that … [Read more...]

May 14, 2012 – Quote of the Day

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“Republicans and Democrats won’t engage in any kind of austerity because there is no consequence for the fiscal profligacy they are allowing today. With the Fed taking 60% of the Treasury’s bond issuance they are pulling the policeman off of the freeway so everyone can keep speeding. Until the bond market moves, you are not going to see a change in the current fiscal … [Read more...]

Special Note to Australian Readers

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Readers of the Diary of a Mad Hedge Fund Trader down under are welcome to join the online “Secure the Future” conference which I will be participating in through the miracle of the Internet. My friend, Greg Owen, created this organization to educate investors in the opportunities available in international markets by bringing in industry veterans like myself. I will be making … [Read more...]

Why is Gold Broken?

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Gold bugs are puzzled by the recent collapse in the price of the barbarous relic. Physical demand has been outstripping supplies for some time now and threatens to reach all-time highs. Demand for 100 ounce gold bars by the 1%’ers is as high as it has ever been. Negative real interest rates for almost all Treasury securities also underpin the bull argument for gold. Mine … [Read more...]

Oregon Becomes the First All Electric State

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As of this week, Oregon will become the first state to complete a chain of charging stations that will enable electric cars to travel from one end of the state to the other. It completed the last of eight 440 volt fast charging stations that allow travel for the full 310 miles on the beaver state’s Interstate 5, from the Washington to the California border. A fleet of Tesla … [Read more...]

Check Out (HDGE) to Limit Downside Exposure

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While scouring the markets looking for great ways to participate in the current slide in the equity indexes, I discovered a real gem. The Advisor Shares Active Bear ETF (HDGE) offers a rifle shot at the true garbage in the market, low dividend companies with deteriorating fundamentals. Run by former Bass Brothers associate Brad Lehmansdorf, it includes such well known losers as … [Read more...]

An Afternoon With FBI Director Robert Mueller

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I immediately recognized Robert Mueller as the kind of no nonsense, fellow ex-Marine, Vietnam Vet that he was, the kind of officer who used to rip your guts out for disobeying a direct order, which in my case was frequently. President Obama thought this was the man you want for your Director of the FBI, which is why Mueller survived as one of the few holdovers from the … [Read more...]

May 10, 2012 – Quote of the Day

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“The policies that we followed since the great crash of 2008 have been pretty darn good. It would be nicer if GDP were galloping at 4% or 5%. But we have had a complete resuscitation of the banking system. We’ve had the economy come back in a very significant way in all cases, except residential construction. Most of our businesses are having record earnings,” said Berkshire … [Read more...]

Euro Crash Warns of More to Come

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A few years ago on the Old Square in Brussels, a delicious luncheon of moules marinières paired with an excellent white burgundy with some European Central Bank officials ran far longer than expected. They were attempting to convince me of the long term viability of the Euro, to no avail. That seriously delayed my departure from Belgium to Salisbury in the English … [Read more...]

Dinner With Robert Shiller

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Yale professor, Robert Shiller, is the kind of imp like, peripatetic college professor you might expect to find in a Disney movie. Highly animated and jumping from one radical idea to the next it is hard to keep up with his stream of consciousness torrent of economic innovations. After a two-hour barrage, I was so intellectually exhausted that all I could do when I returned … [Read more...]

Don’t Miss the Global Strategy Webinar

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The next global strategy webinar will be held on Wednesday, May 9 at 12:00 noon EST. I’ll be giving you my updated outlook on stocks, bonds, commodities, currencies, precious metal, and real estate. The goal is to find the cheapest assets in the world to buy and the most expensive to sell short and what are the appropriate securities with which to take positions. I usually … [Read more...]

Greece to Germany: Drop Dead!

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That is what the head of Greece’s opposition party said this morning in the wake of elections where voters resoundingly rejected austerity in any way, shape, or form. Ditto for France, where the Socialists rode a wave of resentment against the incumbent conservative government. Looks like I will have to pack a red scarf and schedule some time for manning the barricades during … [Read more...]

Why China Isn’t Going to Dump the Dollar

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With Treasury Secretary, Tim Geithner, in Beijing last week kowtowing to the largest foreign owner of our national debt, the prospect of the dollar’s demise as a reserve currency has once again reared its ugly head. Will people pleeease stop incessantly nattering about the possibility of China dropping the dollar as a reserve currency? What else are they going to use? … [Read more...]

Is Food the New Distressed Asset?

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After my entertaining repast with the head of our nation’s intelligence service, I had to ask myself this question. During the sixties, new dwarf varieties, irrigation, fertilizer, and heavy duty pesticides tripled crop yields, unleashing a green revolution. But guess what? The world population has doubled from 3.5 to 7 billion since then, eating up surpluses, and is … [Read more...]

Please Use My Free Data Base Search

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The original purpose of this letter was to build a database of ideas to draw on in the management of my hedge fund. When a certain trade comes into play, I merely type in the symbol, name, currency, or commodity into the search box, and the entire fundamental argument in favor of that position pops up. With a link chain to older stories. You can do the same. Just type … [Read more...]

May 7, 2012 – Quote of the Day

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Bank of America is out of control, yet they’ll never do any time or go out of business, because the government remains creepily committed to their survival, like overindulgent parents who refuse to believe their 40-year-old live at home son could possibly be responsible for those dead hookers in the back yard,” said Matt Taibbi, the muck racking financial journalist for Rolling … [Read more...]

The Lost Decade For Bonds is Beginning!

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In order to enjoy your coming weekend, I thought you'd like a technical update of your positions, so feast your eyes on the two charts below. They say that a picture is worth a thousand words, so here is 2,000 words worth. If you have been negative on bonds as I have, these charts should enable you to sleep much better. Virtually every fixed income product is peaking now. … [Read more...]

Be Careful ,Your PC is Watching

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Hey! You there, staring at this monitor. This is your PC talking to you. No, not you over there standing in the background. I’m talking to the guy sitting in front of me poking at my keys. Ouch! That one hurt! So you thought no one was watching, did you? Let me straighten you out. About a month ago you clicked on a certain website, and I installed myself as a cookie on your … [Read more...]

The Bad Economic Data Deluge

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Traders were sucker punched this morning with the release of the April ADP showing that private sector hiring came in at a flaccid 119,000, some 56,000 less than expected. This signals that the Department of Labor weekly jobless claims due out at 5:30 AM EST could be equally grim, and the Friday nonfarm payroll even worse. My sub 100,000 forecast for the latter is looking … [Read more...]

Undercutting Canadian Tar Sands

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Anyone who has any illusions about the Canadian tar sands business should take a look at the picture below. I’m not a fanatic, sandal wearing, organic bean sprout eating environmentalist, but just looking at it tells you that this is an eco-disaster of Biblical proportions. A $50 billion investment by several firms over the last decade is now producing 750,000 barrels/day, … [Read more...]

The New California Gold Rush

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On my way back from Lake Tahoe last weekend I saw that every bend of the American river was dotted with hopeful miners, looking to make a windfall fortune. Weekend hobbyists were there panning away from the banks, while the hardcore pros stood in hip waders balancing portable pumps on truck inner tubes, pouring sand into sluice boxes. Welcome to the new California gold … [Read more...]

May 3, 2012 – Quote of the Day

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“Isn’t it funny when you walk into an investment firm, and you see all of the financial advisors watching CNBC? That gives me the same feeling of confidence I would have if I walked into the Mayo Clinic or Sloan Kettering and all of the doctors were watching the TV soap opera General Hospital,” said a bond manager friend. … [Read more...]

The Hard Numbers Behind Selling in May.

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If I had a nickel for every time that I heard the term “Sell in May and go away” this year, I could retire. Oops, I already am retired! In any case, I thought that I would dig out the hard numbers and see how true this old trading adage is. It turns out that it is far more powerful than I imagined. According to the data in the Stock Trader’s Almanac, $10,000 invested at the … [Read more...]