The 120/120 Battle

Wacky Guy

Foreign exchange traders are an odd lot. They tend to maintain a laser like focus on specific numbers that are utterly meaningless to us mere mortals, but which have momentous importance to themselves. Right now, one is hearing the battle cry over the 120/120 targets. Specifically, traders want to take the yen down to Y120 to the US dollar, and the Euro down to $1.20 by the … [Read more...]

How to Trade the Rest of 2014

johnthomas transparent

“Be Fearful When Others Are Greedy, and Greedy When Others Are Fearful.” That is one of my favorite quotes from Oracle of Omaha, Warren Buffet, and it was never more true than during the past 30 trading days. It turns out that the lowest risk day to buy stocks in 2014 was October 15, when we saw a giant, capitulation, spike low in the S&P 500 (SPY) down to $182. That … [Read more...]

10 Signs of a Market Bottom

Infrared Picture

Bottom? Bottom? Where’s the market bottom? The talking heads on TV have been working overtime speculating on where the worst move down in the stock market in three years will take us. It all may sound like intelligent prognosticating to you. As for me, I know they are guessing. So I shall share with you my ten benchmark indicators that you can closely track to decide for … [Read more...]

Mad Hedge Fund Trader Tops 30% Gain in 2014

John Thomas

It looks we are going to have to start watching the appalling Zombie shows on TV and in the movies. That is so we can gain tips on how to survive the coming Apocalypse that will unfold when the Ebola virus escapes Texas and spreads nationally. I’m not worried. I’m actually pretty good with a bow and arrow. Thank you United Airlines! I happy to report that the total return … [Read more...]

Why I’m Doubling Up My Shorts

Market Floor

I don’t double up short positions very often. I am too old to lose all my money and go back to work as an entry-level analyst at Morgan Stanley. Besides, they probably wouldn’t have me back anyway. It is a different company than it was 30 years ago, a lot different. However, the dead cat, short covering bounce we got off this morning’s Hong Kong dump does allow me to get back … [Read more...]

She Speaks!

John Thomas

Like a deer frozen in a car’s onrushing headlights, markets have been comatose awaiting Federal Reserve governor Janet Yellen’s decision on monetary policy and interest rates. Interest rates are unchanged. Quantitative easing gets cut by $15 billion next month, and then goes to zero. Most importantly the key “considerable period” language stayed in the FOMC statements, meaning … [Read more...]

A Euro Collapse At Last!

Dollar Certificate

European Central Bank president Mario Draghi pulled the rug out from under the Euro (FXE), (EUO) this morning, announcing a surprise cut in interest rate and substantially adding to its program of quantitative easing. The action caused the beleaguered currency to immediately gap down two full cents against the dollar, the ETF hitting a 15 month low of $127.40. Surprise, that … [Read more...]

Where The Economist “Big Mac” Index Finds Currency Value

mcdonaldsJapan

My former employer, The Economist, once the ever tolerant editor of my flabby, disjointed, and juvenile prose (Thanks Peter and Marjorie), has released its “Big Mac” index of international currency valuations. Although initially launched by an imaginative journalist as a joke three decades ago, I have followed it religiously and found it an amazingly accurate predictor of … [Read more...]

Why I’m Covering Some Euro Shorts

Falling 100 Bills-Euros

We have snatched 92% of the potential profit in the Currency Shares Euro Trust (FXE) September, 2014 $133-$135 in-the-money bear put spread, riding the Euro (FXE) down on the short side, from $1.33 down to $1.30. The risk/reward of continuing with such a large position is no longer justified. So I am going to reduce my overweight position down from 20% back to a more normal … [Read more...]

The Euro Breaks Down

Mario Draghi

You usually don’t expect US housing data to cause the collapse of a foreign currency. But that is exactly what happened this morning. The announcement by the Census Bureau that new home stats for July came in at a breathtaking 1.09 million, up 15.7%, blew away even the optimistic forecasts. Earlier figures for June were revised up substantially. New building permits for July … [Read more...]

Is the Turnaround at Hand, and Ten Stocks to Buy at the Bottom?

Gun-Ammunition-War Room

War threatens in the Ukraine. Iraq is blowing up. Rebels are turning our own, highly advanced weapons against us. Israel invades Gaza. Ebola virus has hit the US. Oh, and two hurricanes are hitting Hawaii for the first time in 22 years. Should I panic and sell everything I own? Is it time to stockpile canned food, water and ammo? Is the world about to end? I think not. In … [Read more...]

Unloading More Euros

Vladimir Putin

The entire foreign exchange world has been on hold this week, waiting for ECB president Mario Draghi to announce a well-deserved cut in Euro (FXE), (EUO) interest rates. The sanctions war with Russia is escalating by the day. Russia banned food imports from the US and Europe, a mere $1 billion trade hickey for us, but a $15 billion punch to the gut for the continentals. Some … [Read more...]

Russian Sanctions Crush European Yields

Tanker

When a rogue element of Ukrainian separatists used a heavy antiaircraft battery supplied by the Russians to shoot down Malaysian Airlines flight 17, who knew that it would send the European bond market into turmoil? Yet, that is exactly what happened. German and French ten-year bond yields have hit 300 year lows at around 1.12% and 1.50%. They achieved 500-year lows in the … [Read more...]

Taking Profits on my Euro Short

Euro Symbol

The market marked our Currency Shares Euro Trust (FXE) August, 2014 $136-$138 in-the-money bear put spread at its maximum value of $2.00 last Wednesday. So I accepted the invitation to take profits and get out. For purposes of my P&L I’ll assume that it costs you two cents to execute, so I posted a selling price of $1.98. That should add 151 basis points to your 2014 … [Read more...]

The Time to Dump the Euro is Here

Euro Symbol

The blockbuster nonfarm payroll on Friday, coming in at a heady 288,000 has certainly removed any doubt that the US economy will reaccelerate in the fall. Earlier months were substantially revised up. Monthly job growth of 200,000 plus now seems to be the new norm, after five consecutive months of such prints. The headline unemployment rate plunged to 6.1%, a new six year … [Read more...]

The ECB’s Draghi Finally Uses His Bazooka

Soldier

After remaining woefully behind the curve on European monetary policy, European Central Bank president, Mario Draghi, has finally leapt to the forefront. Specifically, he has announced a package of measures designed to stimulate the beleaguered continental economy that includes generous doses of interest rate cuts and quantitative easing. In short, his has finally pulled … [Read more...]

Get Ready for the Next Golden Age

thunderbird_1

I believe that the global economy is setting up for a new golden age reminiscent of the one the United States enjoyed during the 1950’s, and which I still remember fondly. This is not some pie in the sky prediction. It simply assumes a continuation of existing trends in demographics, technology, politics, and economics. The implications for your investment portfolio will be … [Read more...]

2014 Annual Asset Class Review

JT at work

I am writing this report from a first class sleeping cabin on Amtrak’s California Zephyr. We are now pulling away from Chicago’s Union Station, leaving its hurried commuters, buskers, panhandlers, and majestic great halls behind. I am headed for Emeryville, California, just across the bay from San Francisco. That gives me only 56 hours to complete this report. I tip my porter, … [Read more...]

Mad Hedge Fund Trader Blasts to new All Time High

TA Performance YTD

The Trade Alert service of the Mad Hedge Fund Trader has posted a new all time high in performance, taking in 46.05% so far in 2013. The three-year return is an eye popping 101.7%, taking the averaged annualized return to 35%. That compares to a far more modest increase for the Dow Average during the same period of 19%. This has been the profit since the groundbreaking trade … [Read more...]

The Rising Risk of a Market Melt Up

Wall Street Bull

The risk of a major market melt up just took a quantum leap upward with the European Central Bank’s surprise 25 basis points in interest rates a few minutes ago. The move had not been expected from normally sleepy and moribund European monetary authorities for a few more months. The ECB’s action has major positive implications for the world economy. It gives a shot of … [Read more...]

Covering Shorts in the Euro

Euro Graphic

This short position has been a total home run of a trade, with the Euro going into freefall when the ink was barely dry on the Trade Alert. Rumors swept the foreign exchange pits this morning of a potential interest rate cut by the European Central Bank next week, which they really should have done a long time ago. Otherwise, the strong continental currency will strangle a … [Read more...]

Taking Profits on My Euro Shorts

Picture-Strange

It looks like the (FXE) gave us the double top at $133 which I predicted in my August 28 webinar, which very conveniently, was the lower strike of my Currency Shares Euro Trust (FXE) September, 2013 $133-$135 bear put spread. We have since backed off $3, and lower levels beckon. I originally wrote this Trade Alert on July 18 while on the express train from Berlin to … [Read more...]

Get Ready for the Next Golden Age

'57 T-Bird

I believe that the global economy is setting up for a new golden age reminiscent of the one the United States enjoyed during the 1950’s, and which I still remember fondly. This is not some pie in the sky prediction. It simply assumes a continuation of existing trends in demographics, technology, politics, and economics. The implications for your investment portfolio will be … [Read more...]

Ambush in Australia

Thunder Down Under

For a lifetime central bank watcher, like myself, this was one for the record books. Reserve Bank of Australia, Glenn Stevens, said last week that he welcomed a weak Australia dollar and that it probably had further to fall. To put gasoline on the flames, he added that there was room for the RBA to further lower interest rates, assuring that more weakness in the Aussie was … [Read more...]

The Mystery of the Strong Euro

John Thomas - Portofino

I sit here on the Carrera marble paved terrace of the Emperor’s Suite of the Imperial Hotel, in Santa Margherita Ligure on the Italian Riviera. As the sun sets into a languid Mediterranean, a distant church bell tolls, calling the evening mass. A flock of larks perform a spectacular aerobatic display overhead. A never-ending torrent of Vespa’s speed past on the road below, … [Read more...]

Get Ready for the Next Golden Age

'57 T-Bird

I believe that the global economy is setting up for a new golden age reminiscent of the one the United States enjoyed during the 1950’s, and which I still remember fondly. This is not some pie in the sky prediction. It simply assumes a continuation of existing trends in demographics, technology, politics, and economics. The implications for your investment portfolio will be … [Read more...]

Suddenly Those Italian Lessons Are Paying Off

Black Swan

Welcome to the first black swan of 2013! You couldn’t mistake the meaning of the cries of topless female protesters as they flung themselves at police guarding Italian polling stations on Monday. Basta! Basta! Enough! Enough! The purpose of their demonstration was visibly scrawled in large letters across their nubile bodies in black ink for all to see. Mille grazie … [Read more...]

The Race to the Bottom for Currencies Means a Race to the Top for Stocks

Clint Eastwood

Even the Old Hands, like myself, are somewhat amazed by the strength of the global equity markets this month. The S&P 500 has risen 11 out of the last 12 trading days, and is up almost every day this month. It has been the best January in 18 years. The first week saw the biggest inflows to equity mutual funds in 10 years. Yet, the market went up so fast, most of the … [Read more...]

The Fed Says No QE3

ben-bernanke-2

As I expected, the wildly optimistic expectations for further quantitative easing by the Federal Reserve at yesterday’s Open Market Committee meeting were not matched with substance. All we got was a continuation of existing modest programs and some minor tweaking of language. Bernanke only managed to say that, “further stimulus will be provided as needed.” The Fed left … [Read more...]

Mr. Mario’s Big Bluff

Starship_pain

A couple of alleged Tweets, a few rumored phone calls, and what have we got? $2 trillion in new global stock market capitalization in hours. That was the bottom line after the purported communication between the staffs of Germany’s Angela Merkel, France’s Jean Francois Hollande, and ECB president Mario Draghi. But is the creation of this immense new wealth, which would alone … [Read more...]

No Fed Action Disappoints QE Bulls

Ben-Bernanke_1

It’s always nice when intelligent people agree with you. That was my feeling after the Federal Reserve gave notice today that it was downgrading its forecast of US economic growth for 2012 from 2.6% to 2.15%. That is a major step down from the 3% and higher predictions they were hanging on to earlier. The news came in the written statement that followed the Fed’s somewhat … [Read more...]

My Tactical View of the Market

300px-Italian_battleship_Roma_1940_starboard_bow_view

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...]

My Tactical View of the Market

plastic-surgery-star-trek

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...]

Greece to Germany: Drop Dead!

carla-bruni

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...]

Is France the Next PIIG?

Gitanes

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...]

It’s All About the Euro

10919726-broken-euro--finance-and-politics-in-europe

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

2012 Annual Asset Class Review

2011Chicago040

I am writing this report from a first class cabin on Amtrak’s California Zephyr en route from Chicago to San Francisco. The majestic snow covered Rocky Mountains are behind me. There is now a paucity of scenery, with the endless ocean of sage brush and salt flats of Northern Nevada outside my window, so there is nothing else to do but to write. My apologies to readers in Wells, … [Read more...]

Bear Trap Sprung

lemmings

The coming bear trap that I warned about last week sprung this morning on the non-subscribing unwary, triggering panic buying by short sellers in all “RISK ON” assets. Oil (USO), gold (GLD), silver (SLV), copper (CU), and foreign currencies all moved in lockstep to the upside. The trigger was news that leaked out over the weekend that the International Monetary Fund would make … [Read more...]

IMF Euro Bail Out Attempt Flops

Bucket2

The International Monetary Fund announced a new facility for members to address a short term liquidity crisis. The measure is aimed at beleaguered Europeans girding themselves for a steady worsening of their sovereign debt crisis in the hope of “breaking the chain of contagion.”  But the measure is more of a squirt gun than a bazooka. Specifically, the IMF has offered 6 … [Read more...]

Meet the Teflon Market

guillotine

Pound away at this market all you want, and it just refuses to go down. In recent weeks we have received a torrent of bad news from Europe, including the fall of governments in Greece and Italy, and the S&P 500 index keeps migrating back to the 1,260 level, as if attracted by some supernatural, magnetic force. It is no coincidence that this is where the closely followed big … [Read more...]