A few years ago, I went to a charity fundraiser at San Francisco?s priciest jewelry store, Shreve & Co. The well-heeled masters of the universe bid for dates with the local high society beauties, dripping in diamonds and Channel No. 5. Well fueled with champagne, I jumped into a spirited bidding war over one of the Bay Area?s premier hotties, whom shall remain nameless. Suffice to say, she has a sports stadium named after her.
The bids soared to $12,000, $13,000, $14,000. After all, it was for a good cause, Pari Livermore?s California State Parks Foundation. But when it hit $12,400, I suddenly developed lockjaw. Later, the sheepish winner with a severe case of buyer?s remorse came to me and offered his date back to me for $14,000.? I said ?no thanks.? $13,000, $12,000, $11,000? I passed.
The current altitude of the stock market reminds me of that evening. If you rode gold (GLD) from $800 to $1,920, oil, from $35 to $149, and the (DIG) from $20 to $60, why sweat trying to eke out a few more basis points, especially when the risk/reward ratio sucks so badly, as it does now?
I realize that many of you are not hedge fund managers, and that running a prop desk, mutual fund, 401k, pension fund, or day trading account has its own demands. But let me quote what my favorite Chinese general, Deng Xiaoping, once told me: ?There is a time to fish, and a time to hang your nets out to dry.? That?s why my cash position has steadily been rising over the last few weeks.
At least then I?ll have plenty of dry powder for when the window of opportunity reopens for business. So while I?m mending my nets, I?ll be building new lists of trades for you to strap on when the sun, moon, and stars align once again.
As for that date? She eventually married one of California premier technology titans, an established billionaire in his own right, and now has two cute kids. It?s all part of life?s rich mosaic. And sorry, I?m not saying who because gentlemen don?t talk.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Shreve-Co..jpg378431Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-16 01:33:032013-04-16 01:33:03Bidding for the Stars
Travel guru, Arthur Frommer, says that now is the best time to travel in 20 years, thanks to a combination of a strong dollar and desperate price-cutting forced by the recession.
Three years after oil hit an historic peak at $148/barrel, when $500 fuel surcharges abounded, and the demise of the travel industry was widely predicted, costs in some countries, like Mexico and Costa Rica are 50% lower than a year ago. Talk about price elasticity with a turbocharger!
Frommer believes there are three sea change trends going on today. Business is moving away from the big three travel websites, Travelocity, Orbitz, and Priceline, who have more preferential side deals with airlines than can be counted, towards pure aggregator sites that almost always offer cheaper fares, like Kayak.com, Momondo.com, and farechase.yahoo.com.
There is a move away from traditional 48 person escorted bus tours towards small group adventures, like those offered by Gap Adventures, Intrepid Tours, and Adventure Center, that take parties of 12 or less on eye opening public transportation.
There has also been a huge surge in programs offered by universities that turn travelers into students for a week to study the liberal arts at Oxford, Cambridge, and UC Berkeley. His favorite was the Great Books programs offered by St. Johns University in Santa Fe, New Mexico. He says that the Internet has given a huge boost to international travel, but warns against user generated content, 70% of which is bogus and posted by the hotels and restaurants themselves.
The 79-year-old Frommer turned an army posting in Berlin in 1952 into a travel empire that publishes 340 books a year, or one out of every four travel books on the market. I met him on a swing through the San Francisco Bay Area (his ticket from New York was only $150), and he graciously signed my original 1968 copy of Europe on $5 a Day, which was crammed in my backpack for two years.
Which country has changed the most in his 60 years of travel writing? France, where the citizenry have become noticeably more civil since losing WWII. Bali is the only place where you can still travel for $5/day, although you can see Honduras for $10. Always looking for a deal, Arthur's next trip is to Chile, the only country hes has never visited, because the currency there has crashed.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Europe-on-5-a-Day-cover.jpg481275Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-16 01:32:012013-04-16 01:32:01An Evening with Travel Guru Arthur Frommer
Some taxpayers have been sending birthday cards in with their tax returns this year. That?s because the International Revenue Service, the collector of America?s tax revenues, is 100 years old this week.
Although the wealthy have been paying income taxes since the 1861-65 Civil War, they did not apply to the rest of us until the passage of the 16th Amendment. The original form 1040, of which I have included a copy below, was one page long and imposed a starting tax rate of 1% over incomes of $3,000. The maximum tax rate was 7%. It included a deduction for shipwrecks.
When WWI broke out, that rate was taken up to 77%. Only 3% of the population had tax liabilities, compared to 54% today. Since 1913, the pages of instructions and deductions have soared from one to over 77,000. Today, some 6.6 billion man hours are spent preparing US tax returns. Talk about a growth business!
According to the Pew Research Center, 56% of Americans dislike taxes, but 71% feel they have a moral responsibility to pay what they owe. Yet, 34% say they pay more than their fair share of taxes, while 60% believe they are paying the right amount.
In 1775, the American Revolution first started as a tax revolt, with American merchants protesting the special exemptions enjoyed by British ones. That led to the Boston Tea Party whereby Americans masquerading as Indians dumped competing duty free imports overboard. Fairness of the system has been a recurring theme ever since. That is why Mitt Romney?s 13.9% tax rate was such a big deal in the 2012 presidential election.
About 1% of taxpayers are audited each year, with the wealthiest 12 times more likely to get audited than the middle class. Where are the residents least likely to be audited by the IRS? The Aleutian Islands in Alaska. And the most likely? Beverly Hills, California. Small businesses top the list, with those in the real estate and construction industries dominating.
The Justice Department brings about 1,000 criminal tax evasion cases a year. Jail times have only been required since 1987. That works out to one return out of every 150,000, so play audit roulette if you will. Their success rate in obtaining convictions is a mathematically impossible 98.5%.
What is the most common error committed on tax returns? Divorced parents both claiming the same children as dependents. The mistake is automatically caught by electronic filing with the earliest filer getting the tax savings. So don?t bother.
Now how much did I lose on that shipwreck last year?
?Taxes are what we pay for a civilized society,? said Oliver Wendell Holmes, a Supreme Court justice servicing at the time of the enactment of the tax code in 1913. The slogan is inscribed in huge letters on the face of the IRS headquarters in Washington DC.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Oliver-Wendell-Holmes.jpg271189Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-16 01:30:542013-04-16 01:30:54April 16, 2013 - Quote of the Day
Featured Trade: (GOLD: NEXT STOP $1,250!), (GLD), (GDX), (SLV), (PPLT), (PALL), (USO), (CU), (FXY), (APRIL 17 GLOBAL STRATEGY WEBINAR), (APRIL 19 CHICAGO STRATEGY LUNCHEON), (SIGN UP NOW FOR TEXT MESSAGING OF TRADE ALERTS)
SPDR Gold Shares (GLD)
Market Vectors Gold Miners ETF (GDX)
iShares Silver Trust (SLV)
ETFS Physical Platinum Shares (PPLT)
ETFS Physical Palladium Shares (PALL)
United States Oil (USO)
First Trust ISE Global Copper Index (CU)
CurrencyShares Japanese Yen Trust (FXY)
Sometimes, the best trades are the ones you don?t do. I actually wrote up a Trade Alert to buy gold on Thursday, figuring that it would bounce the first time it hit my downside target of $1,500.
But then I scanned the entire hard asset landscape, and saw that everything was selling off huge; silver (SLV), platinum (PPLT), palladium (PALL), oil (USO), copper (CU), and iron ore. I took a long nap. When I woke up, I decided that there was something much bigger going on here, and the urge to buy the barbarous relic suddenly vaporized. I sent the Trade Alert to my recycle bin.
The selloff that ensued on Friday was of Biblical proportions, with the yellow metal taking an unbelievable $86, 5.5% swan dive. They say this is the commodity that takes the stairs up and the elevator down, and that was no more true than today.
I have been pounding the table trying to get readers out of gold since early December. It is clear what is going on here. The world is dumping hard assets of every description and pouring the money into paper ones. Commodities you can drop on your foot are getting dumped, and generous premiums are being paid for anything that can be created with a printing press. It?s as simple as that.
This is why you are having both bonds and stocks going up at the same time, a rare event in capital markets. In effect, everything is now a bond, both the wide array of fixed income securities that are getting chased, along with dividend yielding stocks. This is why a wide swath of technology stocks, like Apple (AAPL), are not participating in the game.
I called around to some of the leading technical analysts to see how much pain gold was in for. The tidings were grim. The 200-week moving average at $1,433 looks like a chip shot. If that doesn?t hold, then $1,300 is in the cards. My favorite target is the old October, 2009 breakout level where the Reserve Bank of India came in out of the blue and bought 200 tonnes of the sparkly stuff, punching it through to a new all time high. The previous resistance should now become support. This is the number my jeweler favors.
To make matters particularly fiendish for traders, we may see a breakdown well into the $1,400?s that sucks in tons of capitulation sellers, then a big bounce before a downtrend resumes. It is a scenario that will be enough to test even the most devoted of gold bugs.
At risk is nothing less than the end of a bull market that is entering its 12th year. The shares of gold miners suggest that the demise of gold is already a foregone conclusion. The index for this group (GDM) has breached major support once again and is looking for a new four year low. Since this index usually correlates very highly with the barbarous relic, the writing is on the wall.
There are a host of reasons why the yellow metal has suddenly become so unloved. The largest holder of the gold ETF (GLD), John Paulson, is getting big redemptions in his hedge fund, forcing him to sell. This is why the selling is so apparent in the paper gold markets, like the ETF?s, but not in the physical bars and coins.
India has suddenly seen its currency, the rupee, drop against the greenback. That reduces the buying power of the world?s largest gold importer. With years of pernicious deflation ahead of us, who needs a traditional inflation hedge like the yellow metal anyway?
The hyper quantitative easing announced by the BOJ last week has created an entire new class of gold liquidators. Gold has actually risen dramatically in yen (FXY) terms over the past five months, so retail jewelers across Japan have had to expand business hours to accommodate long lines of eager sellers. The overflow is hitting the international markets big time.
Here is the final nail in the coffin for gold. Gold has had a dozen reasons to rally over the past six months. Those include the European monetary crisis, the Italian elections, the Spanish elections, the Cyprus bank account seizures, sequestration, the fiscal cliff, Ben Bernanke?s QE3, the Japanese ultra QE, rising capital gains taxes, and even the reelection of president Obama. It has utterly failed to do so.
Any trader long in the tooth, such as myself, will tell you that if a market can?t rally on repeated fabulous news, then you sell the daylights out of it. That is what we got with gold, in spades, on Friday.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Market-Down.jpg415564Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-15 09:24:352013-04-15 09:24:35Gold: Next Stop $1,250!
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Chicago on Friday, April 19. 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 real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $199.
I?ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a downtown Chicago venue on Monroe Street that will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/01/Chicago1.jpg240351Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-15 09:17:062013-04-15 09:17:06April 19 Chicago Strategy Luncheon
?It?s never a pretty hand off when you go from the growth crowd to the value crowd. The baton always seems to get dropped,? said Kevin Landis of First Hand Capital Management, about this year?s share price action in Apple.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Relay-Runner.jpg220391Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-15 09:13:332013-04-15 09:13:33April 15, 2013 - Quote of the Day
One of the great asset management blunders of all time has to be the European Community?s decision to sell its gold reserves in the wake of the launch of the Euro in 1998. The decision led to the fairly rapid sale of 3,800 tons of the yellow metal at an average price of $280/ounce, reaping about $56 billion, according to the Financial Times.
Today with gold at $1,559/ounce, the stash would be worth $300 billion. On top of this, the Swiss National Bank is poorer by $70 billion, after offloading 1,550 tons of the barbaric relic. The large scale, indiscriminate selling depressed gold prices in the early part of this decade, and made the final bottom of a 20 year move down.
It is a classic example of what happens when bureaucrats take over the money management business, ditching the best performing investment on the eve of a long-term bull market. The funds raised were largely placed in poorly performing national Eurobonds.
Where did all that gold go? To hedge funds, gold bugs, and inflationistas of many stripes, despite the fact that long dreaded price hyperinflation never showed.? The good news for gold bugs is that these reserves are largely drawn down now, and future selling will trail off in the years ahead. The shrinking supply can only be positive for prices.
Never Let a European Civil ?Servant Trade Your Portfolio
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Steve-Martin.jpg208297Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-12 09:14:022013-04-12 09:14:02The Worst Trade of All Time
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