SOCIALISM
You have 2 cows.
You give one to your neighbor.
COMMUNISM
You have 2 cows.
The State takes both and gives you some watered-down milk.
FASCISM
You have 2 cows.
The State takes both and sells you some milk at an inflated price.
NAZISM
You have 2 cows.
The State takes both and sends you to a concentration camp.
BUREAUCRATISM
You have 2 cows.
The State takes both, shoots one, milks the other, and then throws the
milk away.
TRADITIONAL CAPITALISM
You have two cows.
You sell one and buy a bull.
Your herd multiplies and the economy grows.
You sell them and retire on the income, but worry about your cholesterol level and blood pressure.
ROYAL BANK OF SCOTLAND (VENTURE) CAPITALISM
You have two cows.
You sell three of them to your publicly listed company, using letters of
credit opened by your brother-in-law at the nontax treaty offshore bank then executes a debt/equity swap with an associated general offer so that you get all four cows back, with a tax exemption for five cows.
The milk rights of the six cows are transferred via an anonymous intermediary to a Cayman Island Company secretly owned by the majority shareholder who sells the rights to all seven cows back to your listed company. The annual report says the company owns eight cows, with an option for one more. You sell one cow to buy a new president of the United States, leaving you with nine cows. No balance sheet was provided with the release. The public then buys your bull. You are lauded as a titan of free market capitalism.
SURREALISM
You have two giraffes.
The government requires you to take harmonica lessons.
AN AMERICAN CORPORATION
You have two cows.
You sell one and force the other to produce the milk of four cows.
Later, you hire a consultant to analyze why the cow has dropped dead. PETA sues you and pickets your office.
A FRENCH CORPORATION
You have two cows.
You go on strike, organize a riot, and block the roads because you
want three cows. And you have a fabulous time doing all this. The world is shocked.
A JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and
produce twenty times the milk.
You then create a clever cow cartoon image called a Cowkimona and market
it worldwide. Then your stock crashes.
AN ITALIAN CORPORATION
You have two really fine, stylish cows that cost a fortune, but you don't know where they are.
You decide to have lunch with a fine bottle of Antinori, and top it all off with a potent grappa and double espresso.
A SWISS CORPORATION
You have 5000 cows. None of them belong to you.
You charge the owners for storing them.
The US IRS launches a criminal investigation, and arrests every Swiss banker when they go shopping in New York.
A CHINESE CORPORATION
You have two cows.
You have 300 people milking them.
You claim that you have full employment and high bovine productivity.
You arrest the newsman who reported the real situation. Then your stock crashes.
AN INDIAN CORPORATION
You have two cows.
You worship them and feed them all your garbage.
A BRITISH CORPORATION
You have two cows.
Both are mad, but drink great beer.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/03/Cow.jpg273276The Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngThe Mad Hedge Fund Trader2023-12-05 09:02:042023-12-05 11:51:42A Cow Based Economics Lesson
And if you lose your job to AI in five years you will be one of the lucky ones.
It’s possible that your job is already gone, they just haven’t told you yet.
The shocking conclusion I am getting from dozens of research fronts is that artificial intelligence and automation are accelerating far faster than anyone realizes.
It is all extraordinarily disruptive.
This will cause corporate profits to rocket and share prices to soar but at the price of higher nationwide political instability.
A big leap took place at the beginning of the year when suddenly it appeared that everything got a lot smarter.
My local Safeway has started using self-checkout scanners to enable customers to avoid the long lines still operated by humans.
I hate them because I can never get them to scan pineapples correctly.
Soon, Amazon (AMZN) opened a supermarket in Seattle where there is no checkout stand at all. You simply just pick up whatever products you want, and it will scan them all on the way out to the parking lot.
Once the software is perfected (it is self-learning), and the consumers are educated, 5 million checkout clerks will be joining the unemployment lines.
Uber has been testing self-driving taxis in Phoenix, AZ, with sometimes humorous results. It seems that other human-driven cars like crashing into them. There has been one fatality so far when the human safety driver was caught texting.
When they figure this out, probably in two years, 180,000 taxi drivers and 600,000 Uber and Lyft drivers will have to hit the road.
Some 3 million truck drivers will be right behind them.
Notice that I am only a couple of paragraphs into this peace and already 8,780,000 jobs are about to imminently disappear out of a total of 150 million in the US.
Two decades from now, only vintage car collectors or the very poor will be driving their cars if Tesla (TSLA) has anything to do with it.
I let my Model X drive me around most of the time. It has reaction time, night vision, and a 360-degree radar system that are far better than my 71-year-old senses.
However, all new Teslas now come equipped with the hardware to use it. They are all only one surprise overnight software upgrade away from the future.
And it's not just the low-end high school dropout jobs that are being thrown in the dustbin of history.
Automation is now rapidly moving up the value chain.
A rising share of online news is machine-generated and is targeting you based on your browsing history. You just didn’t know it.
It was a major influence in the last election.
Blackrock (BLK), the largest fund manager in the country, has announced that it is laying off dozens of stock analysts and turning to algorithms to manage its vast $8.6 trillion in assets under management.
As the April 15 tax deadline relentlessly approaches, you are probably totally unaware that an algorithm prepared your return, particularly if you use a low-end service like H & R Block (HRB) or Intuit’s (INTU) TurboTax.
Because of the simultaneous convergence of multiple technologies, half of all current jobs will likely disappear over the next 20 years.
If this sounds alarming, don’t worry.
We’ve been through all of this before.
From 1900 to 1950 farmers fell from 40% to 2% of the labor force. The food output of that 2% has tripled over the last 60 years, thanks to improved seed varieties and farming methods.
The remaining 38% didn’t starve.
They retrained for the emerging growth industries of the day, automobiles, aircraft, and radio.
But there had to be a lot of pain along the way.
More recently, some 30% of all job descriptions listed on the Department of Labor website today didn’t exist 20 years ago.
Yes, disruption happens fast.
And here’s where it gets personal.
Since I implemented an AI-driven, self-learning Mad Hedge Market Timing algorithm to assist me in my own Trade Alert service six months ago, MY PERFORMANCE HAS ROCKETED, FROM A 21% ANNUAL RATE TO 51%!
As a result, YOU have been crying all the way to the bank!
The proof is all in the numbers (see chart below).
Those trading without the tailwind of algorithms today suddenly find the world a very surprising and confusing place.
They lose money too.
The investment implications of all of this are nothing less than mind-boggling.
Wages are almost always the largest cost for any business, especially the labor-intensive ones like retailing, fast food, and restaurants.
Reduce your largest expense by 90% or more, and the drop through to the bottom line will be enormous.
Stock markets have already noticed.
Maybe this is why price-earnings multiples are trading at a multi-decade high of 19.5X.
Perhaps, the markets know something that we mere humans don’t?
It also is the largest budgetary item in any government-supplied service.
I bet that half of the country’s 7 million teaching jobs will be gone in a decade, taken over by much cheaper online programs.
Today, my kids do their homework on their iPhones, complete class projects on Google Docs, and get a report card that is updated and emailed to me daily.
They’re probably to last generation to ever go to a physical school.
(That’s life. Just as the cost of driving them to school every day becomes free, they don’t have to go anymore).
You can always adopt a “King Canute” strategy and order the tide not to rise.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/03/12-month-story-2-1-e1521668829556.jpg349580MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2023-11-14 09:02:152023-11-14 12:13:57Why You Will Lose Your Job in the Next Five Years, and What to do About it
While recently winging my way across the South Pacific a few years ago and browsing the local papers, I spotted an unusual job offer:
WANTED: Social worker, tax-free salary of $60,000 with free accommodation and transportation, no experience necessary, must be flexible and self-sufficient.
With the unemployment rate rising for recent college grads, I was amazed that they were even advertising for such a job. Usually, such plum positions get farmed out to a close relative of the hiring officials involved.
Intrigued, I read on.
To apply, you first had to fly to Auckland, New Zealand, then catch a flight to Tahiti. After that you must endure another long flight to the remote Gambler Island, then charter a boat for a 36-hour voyage.
Once there, you had to row ashore to a hidden cove on the island, as there was no dock or even a beach.
It turns out that the job of a lifetime is on remote Pitcairn Island, some 2,700 miles ENE of New Zealand, home to the modern descendants of the mutineers of the HMS Bounty.
History buffs will recall that in 1790, Fletcher Christian led a rebellion against the tyrannical Captain William Bligh, casting him adrift in a lifeboat.
He then kidnapped several Tahitian women and disappeared off the face of the earth. When he stumbled across Pitcairn, which was absent from contemporary naval charts, he burned the ship to avoid detection.
An off-course British ship didn’t find the island until some 40 years later, only to find that Christian had been killed for his involvement in a love triangle decades earlier.
The job is not without its challenges. There is only one doctor, and electric power is switched on only 10 hours a day. Supply ships visit every three months. The local language is a blend of 18th century English and Tahitian called Pitkern, for which there is no dictionary.
Previous workers have a history of going native. Oh, and 10% of the island’s 54 residents are registered sex offenders, due to its long history of incest.
The next time someone you know complains about being unable to find a job, just tell them they are not looking hard enough, and to brush up on their Pitkern.
For more on the job situation, please visit my website by clicking here.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/Bounty-ship-story-2-image-1-e1526508746559.jpg242350MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2023-10-03 09:02:382023-10-03 12:51:08Who Says There Aren't Any Good Jobs?
I have long told my listeners at conferences, webinars, and strategy luncheons my definition of the “new inflation”: the price for whatever you have to buy is rising, as with your home, health care, and a college education.
The price of the things you need to sell, such as your labor and services, is falling.
So while official government numbers show that the overall rate of inflation is muted at multigenerational highs, the reality is that the standard of living of most Americans is being squeezed at an alarming rate by both startling price increases and real wage cuts.
I finally found someone who agrees with me.
David Stockman was president Ronald Reagan’s director of the Office of Management and Budget from 1981-1985. I regularly jousted with David at White House press conferences, pointing out that the budgets he was proposing would not produce a balanced budget, as he claimed.
Instead, I argued that they would lead to an enormous expansion of the federal deficit. In the end, I was right, with the national debt growing 400% during the Reagan years.
To his credit, David later admitted to running two sets of books for the national accounts, one for external consumption for people like me, and a second internal one for the president with much more dire consequences.
When David finally made the second set of books public, there was hell to pay. It was a fiery departure. I knew Ronald Reagan really well, and when the cameras weren’t rolling, he could get really angry.
After a falling out with Reagan over exactly the issues I brought up, Stockman disappeared for three decades.
He is now back with a vengeance.
He is running a blog named David Stockman’s Contra Corner (click here for the link at http://davidstockmanscontracorner.com ), a site he says “where mainstream delusions and cant about the Welfare State, the Bailout State, Bubble Finance, and Beltway Banditry are ripped, refuted and rebuked.” (Good writing was never his thing).
Despite this rant, there is no place I won’t go to discover some valid arguments and useful statistics, and Stockman is no exception.
For a start, home utility prices have been skyrocketing for the past decade, nearly doubling. Over the last 12 months alone, it has jumped by 5.3%, while natural gas is up more than 10%, compared to an annual Consumer Price Index rise of only 3.3%.
But utilities have such a low 5% weighting in the Fed’s inflation calculation it barely moves the needle.
Wait, it gets better.
Gasoline costs have also been on a relentless uptrend since the nineties. Crude oil is up from a $10 low to today’s print of $95. Retail gasoline has popped from $1 a gallon to $5.50 in California, and that’s off from the year’s high at $3.50.
That works out to an annualized increase of 57%, or more than triple the official inflation rate.
The nation’s 40 million renting households have been similarly punished with price increases. They have averaged a 5.0% annual rate, nearly double the inflation rate.
The country’s 75 million homeowners are getting hit in the pocketbook as well. They have seen the cost of water, sewer, and trash collection balloon at a 4.8% annualized rate. And this has been an almost entirely straight-line move, with no pullbacks. And home insurance? It is absolutely through the roof.
David recites a dirty laundry list of Fed omissions and understatements on the inflation front, including gold, silver, and commodities prices.
All of these nickels and dimes add up to quite a lot for a family of four who is trying to scrape by on a median household income of $69,000 a year. And Heaven help you if you try to live on that in California.
The cost of a few items has declined, but not by much. They are largely composed of cheap import substitutes from Asia, including apparel, shoes, household furniture, consumer electronics, toys, and appliances.
One area the Fed data doesn’t remotely come close to measuring is the plunging cost of technology. How do you measure the savings from products that didn’t exist 20 years ago, like smart phones, iPods, iPads, and solid-state hard drives? How do you measure the cost of services that are handed out for free as Google, Facebook, and X do?
I can personally tell the cost of my own business is probably 90% cheaper to run than it would have three decades ago. I remember shelling out $5,000 for a COMPAQ PC that costs $300 today but has 1,000 times the performance.
David finishes withhis usual tirade against the Fed, accusing them of obsessing over the noise of the daily data releases and missing the long-term trend.
Anyone like myself who watched in horror how long it took our central bank to recognize the seriousness of the 2008 financial crisis pr the pandemic would agree.
This all reminds me of what a college Economics professor once told me during the late 1960’s. “Statistics are like a bikini bathing suit. What they reveal is fascinating, but what they conceal is essential.”
https://www.madhedgefundtrader.com/wp-content/uploads/2015/08/Bikini-Clad-Girl.jpg410316Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-09-20 09:02:032023-09-20 16:22:14Tackling the Low Inflation Myth
Mr. John Thomas, you have changed my life. Before I found your service, I bounced from one terrible service to another, losing money at every step of the way. Even when I found you, I was pretty leery. I then pulled off 22 money-making trades in a row. I gained so much confidence that I really poured money into your strategies. Since I met you last year, I have made over $10 million. I bought call options on Tesla when it was at $80. I also filled all 45 trade alerts you send out selling short the (TLT). It really has been an amazing run.
Please accept the attached case of cabernet. It is a mixed case from boutique vineyards that aren’t sold to the public. These are all “know somebody” wines. If you could buy them, they would cost from $220-$500 a bottle.
If there are any charities you would like me to send a check to, just let me know. You’re really great!
https://www.madhedgefundtrader.com/wp-content/uploads/2021/06/smiley-box.png648864Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2023-01-24 09:04:142023-01-24 14:27:46Testimonial
You remember the two oil shocks, don’t you? The endless lines at gas stations, soaring prices, and paying close attention to OPEC’s every murmur?
Now we are about to get the 2020’s environmentally friendly, decarbonizing economy version: the copper shock.
For copper is about to become the new oil.
The causes of the coming supply crunch for the red metal are manifold.
If you take all of the commitments to green energy made by the Paris Climate Accord, which the US just reentered, they amount to demand for copper about three times current world production.
Oops, nobody thought of that.
Copper is needed in enormous quantitates to build millions of electric cars, solar panels, batteries, windmills, and long-distance transmission lines for a power grid that is going to have to triple in size. Lift a 50-pound rotor from a Tesla wheel as I have and most of the weight is in the copper.
You basically don’t have a green movement without copper.
In addition, existing copper miners seem utterly clueless about the coming shortage of their commodities. Capital spending has been deferred for decades and maintenance delayed.
New greenfield mines are scant and far between. Copper inventories are at a ten-year low. Mines were closed for months in 2020 thanks to a shortage of workers caused by the pandemic.
Copper is the last of the old-school commodities that are still actively traded. It takes 5-10 years at a minimum to bring new mines online. By the time potential sites are surveyed, permits obtained, heavy equipment moved on-site, rail lines laid, water supplies obtained, and bribes paid, it can be a very expensive proposition.
That’s why near-term prospects are only to be found in Chile, Peru, and South Africa, not your first choices when it comes to political stability.
Copper is the single best value-for-money conductor of electricity for which there are very few replacements. Aluminum melts and corrodes. And then there is silver (SLV), right below copper of the periodic chart, which gangster Al Capone used to wire his bulletproof 1928 Cadillac so electricity could move faster. Below silver is gold (GLD), a fine conductor of electricity but is somewhat cost-prohibitive.
As a result, base metal copper prices could more than quadruple from here to $15,000 a metric tonne or more. The last time the price was that high was in 1968, when the Vietnam War was in full swing, as the military needs a lot of copper to fight wars. The economy was then booming.
You can’t have a synchronized global economic recovery without a bull market in commodities, and the mother of all recoveries is now in play according to the latest economic data. Phoenix, AZ Freeport-based McMoRan (FCX) is one of the world’s largest producers of copper and a long-time Mad Hedge customer.
The stock has been on a tear for a month. (FCX) has soared from a 25 low in October to near $39 at the recent high. I believe this move will continue for years with a final target of $100. The old high for the stock in the last cycle was $50.
Short term, the demand for copper will be driven by Chinese real estate constructions, with all the Covid lockdowns now weak.
Long term it will be driven by EV production, which will soar from 1.5 million units this year to 20 million by 2030. Each EV required 200 pounds of copper.
I’ll let you do the math.
These Tesla Copper Rotors Weigh About 50 Pounds Each
https://www.madhedgefundtrader.com/wp-content/uploads/2018/12/John-Thomas.png418627Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-11-17 10:02:162022-11-17 12:46:04Watch Out for the Coming Copper Shock
Listen to all 28 speakers opine on the best strategies, tactics, and instruments to use in these volatile markets. It is a true smorgasbord of investment strategies. Find the best one to suit your own goals.
The product discounts offered last week are still valid. Start, stop, and pause the videos at your leisure. Best of all, access to the videos is FREE. Access them all by going to www.madhedge.com, clicking on SEPTEMBER 2022 SUMMIT REPLAYS at the upper right hand corner, and then choosing the speaker of your choice.
We look forward to working with you. The next summit is scheduled for December 6-8, 2022.
https://www.madhedgefundtrader.com/wp-content/uploads/2022/08/sept2022-summit-e1661352182392.png338500Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2022-09-30 11:04:062022-09-30 12:11:38The Mad Hedge September 13-15 Summit Replays are Up
What would happen if I recommended a stock that had no profits, was losing $3 trillion a year and had a net worth of negative $44 trillion?
Chances are, you would cancel your subscription to the Mad Hedge Fund Trader, demand a refund, unfriend me from your Facebook account, and delete me from your Twitter network.
Yet, that is precisely what my former colleague at Morgan Stanley did a few years ago, technology guru Mary Meeker.
Now a partner at venture capital giant Kleiner Perkins, Mary has brought her formidable analytical talents to bear on analyzing the United States of America as a stand-alone corporation.
The bottom line: the challenges are so great they would daunt the best turnaround expert. The good news is that our problems are not hopeless or unsolvable.
The US government was a miniscule affair until the Great Depression and WWII when it exploded in size. Since 1965 when Lyndon Johnson’s “Great Society” began, GDP rose 2.7 times, while entitlement spending leaped 11.1 times.
If current trends continue, the Congressional Budget Office says that entitlements and interest payments will exceed all federal revenues by 2025.
Of course, the biggest problem is with healthcare spending, which will see no solution until healthcare costs are somehow capped. Despite spending more than any other nation, we get one of the worst results, with lagging quality of life, life spans, and infant mortality.
Some 28% of Medicare spending is devoted to a recipient’s final four months of life. Somewhere, there are emergency room cardiologists making a fortune off of this. A night in an American hospital costs 500% more than in any other country.
Social Security is an easier fix. Since it started in 1935, life expectancy has risen by 26% to 78, while the retirement age is up only 3% to 66. Any reforms have to involve raising the retirement age to at least 70 and means testing recipients. If you make $1 billion a year, you don’t need a monthly social security check.
The solutions to our other problems are simple but require political suicide for those making the case.
For example, you could eliminate all tax deductions, including those for home mortgage deductions, charitable contributions, IRA contributions, dependents, and medical expenses, and raise $1 trillion a year. That would only make a dent in our current $3 trillion a year budget deficit.
Mary reminds us that government spending on technology laid the foundations of our modern economy. If the old DARPANET had not been funded during the sixties, Google, Yahoo, eBay, Facebook, Cisco, and Oracle would be missing today. Tech generates about 50% of all the profits in the US today.
Global Positioning Systems (GPS) were also invented by and is still run by the government and has been another great wellspring of profits. (I got to use it during the 1980s while flying across Greenland when it was still top secret. The Air Force base that ran it was called “Sob Story”).
There are a few gaping holes in Mary’s “thought experiment”. I doubt she knows that the Treasury Department carries the value of America’s gold reserves, the world’s largest at 8,965 tons worth $832 billion, at only $34 an ounce, versus an actual current market price of $1,861. By the way, the stash has only been seen once in 50 years.
Nor is she aware that our ten aircraft carriers are valued at $1 each, against an actual cost of $10 billion each in today’s dollars. And what is Yosemite worth on the open market, or Yellowstone, or the Grand Canyon? These all render her net worth calculations meaningless.
No, the USA is not a short. In fact, it is a long term scream long. The arguments as to why show up in the Diary of a Mad Hedge Fund Trader every day of the year. During the publishing run of this letter, I have seen the Dow Average soar from 600 to 30,000.
How could I think otherwise?
Mary expounds at length on her analysis, which you can buy in a book entitled USA Inc. at Amazon by clicking here.
https://www.madhedgefundtrader.com/wp-content/uploads/2020/11/worth-more-than-a-dollar.png372496Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2021-09-15 11:04:152021-09-15 11:31:37Is USA Inc. a Short?
With the Volatility Index (VIX) going through the roof today, I think it is timely to remind everyone what it is.
At my advanced age, I have very few friends. Most of them are either puttering around some county golf course, or are dead.
By there is one who has stuck with me for my entire 50-year trading career, through thick and thin.
That would be Leonardo Fibonacci.
It always seemed like he could read my mind, as well as everyone else’s.
When a stock looks like it fell into a bottomless pit, it would bounce hard off of the precise price that he selected.
Similarly, he always knew high prices would rise before they topped out.
As a result, I think of Fibonacci as more of a magician than a mathematician.
I remember the 12th century like it was yesterday.
In those days, the leading intellectuals used to get together and drink wine by the gallon, which then was really little more than rotten grape juice.
The problem was that we all used to pass out before anybody came up with a great idea.
Then someone started importing coffee from the Middle East, and thinkers stayed awake long enough to produce great thoughts.
Enter the Renaissance.
One of the guys I used to hang out with then was named Leonardo Fibonacci.
Good old Leo was a man after my own heart, a world-class nerd and geek, with a penchant for mathematics.
His dad was a diplomat from the Court at Pisa to the Algiers sultanate who had a nice little import/export business on the side.
It is safe to say that there was probably as little action in Algiers than as there is today. I know, because I’ve been there.
Instead of camping out in his dad’s basement and staying depressed like a lot of young men these days, Leo killed time trolling the local bazaars for interesting used books he could buy on the cheap.
Remember, this was before texting.
That was not hard to do since most people couldn’t read. He took the trouble to learn Arabic and translated them back into Latin. Ancient math books were his specialty.
It didn’t take Leo long to figure out that the Arabs had developed a numbering system vastly superior to the Roman numerals then in use in Europe.
Most importantly, they mastered the concept of zero and the placement of digits in addition and subtraction. The Arabs themselves, in fact, lifted these concepts from archaic Indian mathematicians as far back as the 6thcentury.
If you don’t believe me about the significance of this discovery, try multiplying CCVII by XXXIV. (The answer is VIIXXXVIII, or 7,038).
Good luck designing a house, a bridge, or a computer software program with such a cumbersome numbering system.
Leo didn’t just stop there.
He also discovered a series of numbers, which seemed to have magical predictive powers. The formula is extremely simple. Start with zero, add the next number, and you have the next number in the series.
Continue the progression and you get 0,1,1,2,3,5,8,13,21,34,55…. and so on. It’s no surprise that the sequence became known as the “Fibonacci Sequence”.
The great thing about this series is that if you divide any number in it by the next one, you get a product that has become known as the “Golden Ratio”. This number is 1:1.618, or 0.618 to one.
Fibonacci’s original application for this number was to predict the growth rate of a population of breeding rabbits.
Then some other mathematicians started poking around with it. It turns out the Great Pyramid in Egypt was built to the specification of a Fibonacci ratio.
So is the rate of change of the curvature in a seashell, or a human ear. So is the ratio of the length of your arms to your legs.
Upon closer inspection, the Fibonacci formula turned out to be absolutely everywhere, from the structure of the tiniest cell to the swirl of the largest galaxies in the universe.
Fibonacci introduced his findings in a book entitled “Liber Abaci”, or “Free Abacus” in English, which he published in 1202.
In it, he proposed the 0-9 numbering system, place values, lattice multiplication, fractions, bookkeeping, commercial weights and measures, and the calculation of interest.
It included everything we would recognize as modern mathematics.
The book launched the scientific revolution in Europe that led us to where we are today and was a major bestseller. In fact, you can still buy it on Amazon, making it the longest continuously published book in history.
Enter the stock market.
By the end of the 19thcentury, some observers noticed that share prices tended to move in predictable patterns on charts.
In particular, they always seemed to advance and pull back around the numbers forecast by my friend, Fibonacci, seven hundred years earlier.
These people came to be known as “technical analysts,” as opposed to fundamental analysts, who look at the underlying business behind each company.
By the 1930s, Fibonacci numbers had worked their way into mainstream technical analytical theories, such as Elliot Wave.
Today, most market tracking software and data systems, like Bloomberg, will automatically throw up Fibonacci support and resistance numbers on every stock chart.
Why am I talking about this?
Because I am frequently asked how I pick the precise strike prices for options in my own Trade Alert Service.
I use a combination of moving averages, moving average convergence-divergence (MACD) indicators, Bollinger bands, Fibonacci numbers, and a mumbling chant taught to me by an old Yaqui Indian shaman.
And I do all of this only after going over the underlying fundamentals of the stock or index with a fine-tooth comb. I can’t be any clearer than that.
Enter the high-frequency traders. Knowing that the bulk of us rely on Fibonacci numbers for our short-term trading calls, they have developed algorithms that seek to exploit that preference.
They enter a large number of stop-loss orders to sell just below a “Fibo” support level, then put up fake, but extremely large offers just above it which are usually cancelled.
Only 1% of these orders ever get executed.
When conventional traders see these huge offers to sell, they panic, dump their stocks, and trigger the stop losses. The HFTs then jump in and cover their own shorts for a quick profit, sometimes only for a fraction of a penny.
The net effect of these shenanigans is to make Fibo numbers less effective. Fibo support is just not as rock solid as it used to be, nor is resistance.
This is why the performance of several leading technical analysts has seriously deteriorated in recent years.
Although their importance is now somewhat diluted, I still enjoy Fibonacci numbers as I see them in nature all around me. They occasionally have other uses such as in cryptography.
When I watched The Da Vinci Code sequel, “Angels & Demons,” and listened to the clues, I recognized the handiwork of my old friend Leo.
The rest of the audience sat there clueless, except for the group in the next row wearing “UC BERKELEY” hoodies.
For the fellow geeks and nerds among you, here are the precise Fibonacci numbers indicating support and resistance, which you will find on a stock chart.
Fibonacci Ratios
Fibonacci ratios are mathematical relationships, expressed as ratios, derived from the Fibonacci sequence. The key Fibonacci ratios are 0%, 23.6%, 38.2%, and 100%.
The key Fibonacci ratio of 0.618 is derived by dividing any number in the sequence by the number that immediately follows it. For example: 8/13 is approximately 0.6154, and 55/89 is approximately 0.6180.
The 0.382 ratio is found by dividing any number in the sequence by the number that is found two places to the right. For example: 34/89 is approximately 0.3820.
The 0.236 ratio is found by dividing any number in the sequence by the number that is three places to the right. For example: 55/233 is approximately 0.2361.
https://www.madhedgefundtrader.com/wp-content/uploads/2018/10/Leonardo-Fibonacci.png464343MHFTFhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTF2021-08-18 09:02:042022-12-28 10:55:10Hanging With Leonardo
With the latest effort to expand quantitative easing through the Fed purchase of individual corporate bonds, we must consider what else our central bank has up its sleeve.
With American interest rates already near zero, the markets will take the rates for all interest-bearing securities well into negative numbers. This has already happened in Japan and Germany.
At that point, our central bank’s primary tool for stimulating US businesses will become utterly useless, ineffective, and impotent.
What else is in the tool bag?
How about large-scale purchases of Gold (GLD)?
You are probably as shocked as I am with this possibility. But there is a rock-solid logic to the plan. As solid as the vault at Fort Knox.
This theory gained credence when my old friend, Judy Shelton, was appointed to the federal reserve, a noted gold bug.
The idea is to create asset price inflation that will spread to the rest of the economy. It already did this with great success from 2009-2014 with quantitative easing, whereby almost every class of debt securities were hoovered up by the government.
“QE on steroids”, to be implemented only after overnight rates go negative, would involve large-scale purchases of not only gold, but stocks, government bonds, and exchange-traded funds as well. Corporate bond purchases are simply a step in that direction.
If you think I’ve been smoking California’s largest cash export (it’s not the raisins) you would be in error. I should point out that the Japanese government is already pursuing QE to this extent, at least in terms of equity-type investments and ETFs, and already owns a substantial part of the Japanese stock market.
And, as the history buff that I am, I can tell you that it has been done in the US as well, with tremendous results.
If you thought that President Obama had it rough when he came into office in 2009 with the Great Recession on, it was nothing compared to what Franklin Delano Roosevelt inherited.
The country was in its fourth year of the Great Depression. US GDP had cratered by 43%, consumer prices crashed by 24%, the unemployment rate was 25%, and stock prices vaporized by 90%. Mass starvation loomed.
Drastic measures were called for.
FDR issued Executive Order 6102 banning private ownership of gold, ordering them to sell their holdings to the US Treasury at a lowly $20.67 an ounce.
He then urged Congress to pass the Gold Reserve Act of 1934, which instantly revalued the government’s holdings at $35.00, an increase of 69.32%. These and other measures caused the value of America’s gold holdings to leap from $4 to $12 billion. That’s a lot of money in 1934 dollars, about $208 billion in today’s money.
Since the US was still on the gold standard back then, this triggered an instant dollar devaluation of more than 50%. The high gold price sucked in massive amounts of the yellow metal from abroad creating, you guessed it, inflation.
The government then borrowed massively against this artificially created wealth to fund the landscape-altering infrastructure projects of the New Deal.
It worked.
During the following three years, the GDP skyrocketed by 48%, inflation eked out a 2% gain, the unemployment rate dropped to 18%, and stocks jumped by 80%. Happy days were here again.
Monetary conditions are remarkably similar today to those that prevailed during the last government gold buying binge.
There has been a de facto currency war underway since 2009. The Fed started when it launched QE, and Japan, Europe, and China have followed. Blue-collar unemployment and underpayment are at a decades high. The need for a national infrastructure program is overwhelming.
However, in the 21st century version of such a gold policy, it is highly unlikely that we would see another gold ownership ban.
Instead, the Fed would most likely move into the physical gold market, sitting on the bid for years, much like it recently did in the Treasury bond market for five years. Gold prices would increase by a multiple of current levels.
It would then borrow against its new gold holdings, plus the 4,176 metric tonnes worth $200 billion at today’s market prices already sitting in Fort Knox, to fund a multi trillion-dollar infrastructure spending program.
Heaven knows we need it. Millions of blue-collar jobs would be created, and inflation would come back from the dead.
Yes, this all sounds like a fantasy. But negative interest rates were considered an impossibility only years ago.
The Fed’s move on gold would be only one aspect of a multi-faceted package of desperate last-ditch measures to extend economic growth into the future which I outlined in a previous research piece (click here for “What Happens When QE Fails” by clicking here).
That’s assuming that the gold is still there. Treasury Secretary Stephen Mnuchin says he saw the gold himself during an inspection that took place on the last solar eclipse over Fort Knox in 2018. The door to the vault at Fort Knox had not been opened since September 23, 1974.
But then Steve Mnuchin says a lot of things. Persistent urban legends and internet rumors claim that the vault is actually empty or filled with fake steel bars painted gold.
But is it Really Gold?
You Can See the Upside Breakout Coming Clear as Day
https://www.madhedgefundtrader.com/wp-content/uploads/2018/05/gold.png506899MHFTRhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMHFTR2021-04-27 10:04:192021-04-27 18:04:14The Secret Fed Plan to Buy Gold
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