Featured Trades: (MY NEAR MISS WITH CISCO)

2) My Near Miss With Cisco. My predatory instinct as a scavenger and bottom feeder is coming to the fore once again. After building up expectations for a blowout quarter, Cisco Systems disappointed once again, prompting traders to trash the stock by 15% in one day. Call me greedy, but my risk averse nature prompted me to take the double that I had on by March $20-$22 bull call spread three weeks earlier. If you wonder why I am still cautious in one of the most Teflon resistant bull markets of all time, this is a good reason.

All of which sets up the exact same trade again. It was actually a decent report, as earnings came in near expectations. But in this unforgiving world analysts saw only the glass half empty and couldn't head for the door fast enough.

This is still one of the world's preeminent technology companies, and is one of the few American ones that makes stuff that people still want to buy. Some 70% of its global sales are to foreigners. Ownership of the router market is nothing to sneeze about, especially when the planet is making the leap to streaming video, causing demand for the company's products to soar tenfold in coming years.

I know CEO John Chambers personally and frequently bump into him at high end charity functions in San Francisco, and a better manager there never was. With a forward price earnings multiple of only 7, it is not often that you get to buy a growth company at a value price, and a Dow stock at that! An announcement of a new 1%-2% dividend is thought to be imminent. They will automatically suck in an entire new class of pension fund investors.

The way to play this is to wait for another haymaker to pop the stock on the nose. That could come in the form of a long awaiting market correction, which could take the broader index down 5%, and (CSCO) down more. Below that, the company's well publicized stock buyback program kicks in. Not only does Cisco benefit from a Bernanke put, it offers investors own free put as well.

I am not the only genius that has figured this out. None other than hedge fund managers George Soros, Eddie Lampert, and Whitney Tilson are similarly accumulating their own long positions in this stock. Watch this space, and I'll pop out a quick trade alert when I see a window open to get in.

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A Near Miss is Better Than No Miss At All

Featured Trades: (THE TREASURY BOND SELL OFF), (TBT), (TLT)

2) A Rest for the Treasury Bond Sell Off. The Great Treasury Bond Sell Off, which has been running now for nearly six months, may be about to take a rest. Take a look at the chart below put out by my friends at StockCharts.com. It shows that the iShares Barclays 20+ Year Treasury Bond ETF (TLT), the single leveraged long ETF, is bouncing off the old resistance line that we saw on the upside last April.

One of the oldest and dustiest rules in any technical analyst's handbook is that old resistance usually becomes new support. You can't see the inverse on a chart of the double short bond ETF, the (TBT), because of the distorting effects of the heavy cost of carry has on the price, nearly 1% a month.

The other interesting thing about this chart is that it shows the perfect inverse correlation between stocks and bonds that has persisted for the past year. This is important because any near term support for bonds could also signal a top for stocks and an ensuing sell off.

There are a few other canaries in the coal mine that I am carefully monitoring. The imminent break in the yen could be signaling a broader change in the global markets. A weakening yen and a strong dollar might well trigger a flight to safety that could deliver broader selling across all asset classes. In this complex and interrelated world, the blow off tops we are seeing in the cotton and sugar markets may be substituting for similar moves we say in stocks in years past.

This is why my short term trading book is the lightest that it has been in a year. I am nursing small, but so far modestly losing shorts in the S&P 500, the yen, the euro against a long position in the volatility index (VIX). The slightest weakness in stocks, and this entire book lurches into the green, big time.

It is all part of the three dimensional chess game we call 'global macro', the great 10,000 piece jigsaw puzzle. Since I have been at this for 40 years, and spent considerable time working in every major securities and commodities market on the planet, I tend to see these sea changes earlier than most. I just thought you'd like to know.

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It's Your Move, Mr. Market

'The jobs that we gained over the last two decades were the jobs that led to over consumption, jobs like finance, insurance, real estate, and consumer cyclicals,' said my old buddy, David Gerstenhaber, President of Argonaut Capital Management.

SPECIAL FLORIDA ISSUE

Featured Trades: (WORLD MONEY SHOW)

2) The San Francisco Money Show. I attended the Woodstock of investment conferences last week, the World Money Show at the Gaylord Palms Resort near Orlando, Florida. Run with military efficiency that only General George S. Patton could have appreciated, it offered a multi ring circus of traders, foreign exchange models, options platforms, newsletters, cruises, video broadcasts, and more.

The cavernous hotel, the size of a small glassed in sports arena was absolutely bubbling with new ideas. You couldn't walk five feet without tripping over a great investment theme, and information overload was the order of the day. There was a plethora of celebrity speakers and old friends, including BMO Capital Markets,' Andrew Busch, uber bear economist, David Rosenberg, Think or Swim founder, Tom Sosnoff, the Financial Times' Gillian Tett, China Stock Digests' Jim Trippon, and fund manager Adrian Day. Forbes publisher, Steve Forbes, was there making his perennial run for the presidency.

There really is no corner of the financial markets that was not well represented by market makers, analysts, technology providers, and investors-- thousands of them. With the soaring level of US government debt scaring the daylights out of everyone, the precious metals dealers were there in force.

Of course, the hard asset crowd was everywhere, and you could not swing a dead cat without hitting a miner looking for new funding. Never mind that the barbaric relic went up for all the wrong reasons. The dollars they're making are still just as good at the bar. The only thing missing from the show was the long predicted hyperinflation. Want to prospect in the Ivory Coast? No problem.

I was pleasantly surprised by the diversity of major corporate sponsors there to promote their own shares, like Sasol, Proctor and Gamble, Petrobras, Roche, General Electric, Vale, and Lucas Energy, several of which are great investments. A variety of oil service companies were also well represented. A 'green' section offered a look at wind, solar, and geothermal energy providers. Even the US Treasury Department had its own diminutive booth, no doubt reflecting the year's coming budget cuts.

I took the opportunity to talk with companies about everything from the latest drilling costs, long term food prices, and the true cost of geothermal, to the clever play in gold coins (go for those struck at the San Francisco Mint). I was constantly amused every few minutes by attendees who, seeing my nametag, asked to have a photo taken with the one and only Mad Hedge Fund Trader, and to sign their program.

The hotel was a bit of a disappointment, which was clearly ill equipped to handle the 8,000 Money Show registrants that descended upon it. I walked out the front door and thought that I had stumbled upon a car show. Instead, it was the gridlocked valet parking, which was diverting guests to another hotel two miles away to catch a shuttle. There were lines longer than those found in nearby Disney World, and when the noontime sessions let out, the restaurants were hit with a plague of locusts, cleaning them out of all food and clean silverware.

After I make my fortune, there was even a booth extolling the virtues of retiring on the beach in Belize. It was a great opportunity to chat with the end investors who ultimately drive all these markets. All in all, it was a weekend well invested. For a calendar of future events, go to www.MoneyShow.com. You will find me at the Las Vegas Money Show during May 9-12 at Caesar's Palace Hotel, where I will be a keynote speaker with my own booth.

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Featured Trades: (JANUARY NONFARM PAYROLL)

 

1) Reading the Nonfarm Payroll Tea Leaves. Lifetime followers of the monthly nonfarm payroll report were more than a little amused by the Friday numbers, which could not have been more contradictory, conflicting, and confusing. The headline figure showed a gain of a paltry 36,000, yet the unemployment rate plunged 0.6% to 9.0%, one of the sharpest drops on record. In fact, the unemployment rate has fallen nearly 1% in two months, one of the sharpest drops on record.

Sifting through the tea leaves, these numbers reveal far more than meets the eye. Here are the high points:

*The unemployment rate dropped sharply because people are giving up on looking for work. Once the jobless exhaust their full 99 weeks of unemployment insurance, they disappear completely out of the system.

*Two successive 'snowmageddons' possibly shrank employment by as much as 150,000. Construction and transportation were especially hard hit. Check out those amazing photos of cars buried by snow drifts in a Chicago traffic jam. They look like they are from a disaster movie. Those are all people not getting to work.

*The private sector gained jobs, while the public sector lost them. This is only the beginning of what I believe is 30 more years of government downsizing at the federal, state, and local levels.

*The 25 million jobs the US gave away to China and other emerging markets are never coming back, no matter how much the government spends. Unemployment is now structural and permanent. An entire generation of jobs was given away.

There is another big factor at work here that no one is discussing. I am not counted in the nonfarm payroll, as I work entirely in the cloud. Nor is anyone who works for me, be they in Washington, New Mexico, New York, or Timbuktu. We are all invisible to the Department of Labor. For all they know, we are all at home sitting on the sofa, watching TV while stuffing ourselves with bonbons, and picking the lint out of our navels.

What I'm getting at here is that the monthly nonfarm payroll is vastly underestimating the number of employed, and has been doing so for a very long time. It reminds me of another anomaly, when personal computers first came one the scene 30 years ago. The government originally treated them as consumer electronics sales, not as capital spending as it should have, similarly misleading us all.

The implication is that the economy is much stronger than we realize. The stock market correctly figured this out, eking out a 30 point gain on what were heralded as disappointing numbers. This is also how some 70% of companies have beaten conservative analyst forecasts in the current earnings season. All that is left to ask is how much of this undercover jobs boom is already priced into the market.

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Should Have Taken That Job in the Cloud!