Private investors from Qatar were major participants in the transaction, helping to recapitalize the new institution. This is just the opening shot in what promises to be a massive consolidation of the European banking system.

The merger triggered an eye popping 14% gain in the Greek stock market, and shined some sunlight on the Euro, which rose a penny against the dollar. It set the cat among the pigeons with the 'RISK OFF' crowd, sending gold and Treasury bonds down substantially.

It also pared another two cents off the Swiss franc. Since I strapped on my puts on the Swiss currency Friday morning, they have rocketed by 67%. Wait for another round of 'RISK ON' in in September to take these puts higher.

For these who wish to participate in Macro Millionaire, my highly innovative and successful trade mentoring program, please email John Thomas directly at madhedgefundtrader@yahoo.com . Please put 'Macro Millionaire' in the subject line, as we are getting buried in emails.

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Thanks for the Assist, Zorba!

Featured Trades: (RARE EARTHS ARE HEATING UP AGAIN)

3) Rare Earths Are Heating Up Again. Long time readers remember fondly my 2010 play in the rare earth sector, where stocks like Molycorp (MCP), Avalon (AVARF), and Lynas Corp (LYSCF) clocked gains of over 400%, and the call options went ballistic (click here for 'Rare Earths Are About to Become a Lot More Rare'). After a somewhat dead 2011, this sector could be in for another shot of adrenalin.

Chinese authorities are enforcing one of the most aggressive clamp downs in history in an effort to close down illegal rare earth mines in China's southern Jiangxi province, it is said, for environmental reasons. ??The Middle Kingdom now accounts for 97% of the world's rare earth supplies, much of it produced by unlicensed rural farmers and organized crime.

The environmental damage caused by these small operators is enormous, with small leaching pits dotting the countryside in rare earth rich areas, seriously polluting local drinking supplies.

China's goal is to consolidate all production into three state owned giants, Baogang, Chinalco, and Minmetals, which, it is hoped, will act more responsibly. Authorities have been burning refineries, arresting offenders, and offering out rewards for others.

So named because they were hard to get in the 18th and 19th century, these once obscure elements have suddenly become the focus of several converging trends in the global economy. They are the key ingredient of magnets. There are 17 in all, divided into light (cerium, Ce, lanthanum, La, and neodymium, Nd) and heavy (dysprosium, Dy, terbium, Tb, and europium, Eu).

It turns out that you can't build a hybrid or electric car, a wind turbine, thin film solar, LED's, high performance batteries, or a cell phone without these elements. One Prius uses 25 kilograms of the stuff. You also can't fight a modern war without rare earths, being essential for radar, missile guidance systems, navigation, and night vision goggles. That's where things get interesting.

Rare earths were never really rare. What is scarce is the cheap labor and scant regulation that enabled them to be produced cheaply. This, China had in abundance. By the early 1990's , most western producers of rare earths had been undercut by low Chinese prices and driven out of business.

Last year, the increasing application of rare earths in modern electronics combined with tightening Chinese export prices drove the prices of some of the more valuable, heavier rare earths up tenfold. Since 2009, China's export quota for rare earths has been pared back from 50,145 tonnes to 30,184 tonnes this year.

This has prompted a scramble to develop new mines, notably in the US and Australia. But these mines take years to bring into operation, and certainly not in time to head off any short squeeze in supplies triggered by the Chinese clean up.?? Molycorp was brought back online after a 20 year hiatus with its IPO last year, but has yet to produce a single ounce. Therein lays the play.

Going back into California's Molycorp at this level is probably not a bad idea. You can also look at the new ETF, Market Vector's Rare Earth/Strategic Metals (REMX), the product of the last bubble in this sector, which fell 36% from its April peak. It we get a return of the global 'RISK ON' trade in September, as I expect, this could be a great place to focus.

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Featured Trades: (TIME TO GO SHORT THE MATTERHORN), (FXF)

2) Time to Dump the Swiss Franc. This will be my first post Bernanke speech trade. The Swiss franc (FXF) has been driven up to absurd levels by a safe haven bid. It is about to suffer a fate similar to its safe haven cousin in the metals market, gold, which plunged an incredible 11% in two days. This is the next 'short gold' trade. If the barbarous relic can fall that far, that fast, so can the Swiss franc.

The Swiss National Bank has undertaken massive efforts to weaken its hopelessly overvalued currency before it completely wrecks the country's economy. For a more detailed report on the travails of the Swiss economy, please click here for 'My Big Miss of the Year'. I love Swiss chocolate, especially Toblerone, but it's not that good. $20 for a cup of coffee? Puleese!

The Swiss National Bank is flooding the domestic money markets with liquidity at an unprecedented rate and intervening in the foreign exchange markets. Harsher measures are rumored to come shortly. This is all fresh red meat for hedge fund traders.

Adding the fat to the fire, on Friday, a rumor swept the foreign exchange market that UBS, the largest bank in Switzerland, would start charging negative interest rates of short term Swiss franc deposits. A similar move during the late seventies heralded the peak of speculation in the Swiss currency. The Swiss franc immediately crashed 3.5 cents. Many stop loss liquidation orders were triggered along the way, causing one of the sharpest declines in the history of the Swiss franc market.

My experience is that, while these measures initially fail and are 'poo pooed' by the market, at the end of the day, they succeed. After all, central banks can print all the money they want. It is far easier to weaken a currency than to strengthen them. We are about to see that with the Swiss currency.

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Time to Go Short the Matterhorn

Featured Trades: (TIME TO BUY SOME FIRE INSURANCE)

3) Time to Buy Some Fire Insurance. I am looking at oil take a swan dive here, bonds pop a point, and even gold performing a rallyette off its $1,700 low. It all looks like 'RISK OFF' to me. So I'm thinking gee, maybe I should hedge some of my downside risk here.

It's not like the positions are so small that I can skip hedging, as they have been for the last couple of months. Then a large move by financial markets could cause only a small impact on my performance. But I have been bulking up my book lately, adding positions in the (TBT), (BAC), and running longs in (CAT). I have also had an incredible hot streak, and it is time to protect some profits.

Going into this morning, the market had been up two days in a row, which is almost unprecedented in the month of August. This will amount to a big screaming 'SELL' to the day traders.

So it seems prudent here to hedge the rest of my portfolio through putting some (SPY) puts. The pop in the market at the open delivered by (BAC) was the gift that allowed me to get a great fill. That cuts my delta going into Bernanke's Jackson Hole speech. I picked the $112 strike, as this is just above the floor of the recent action.

If the Bernanke puts everyone to sleep with his speech and markets rally, I will cover with a small lost. After all, you don't complain when you buy fire insurance and your house doesn't burn down. If he disappoints and we revisit $112, I have downside protection. That's unless we get the entire down move today in anticipation, in which case, I might cover at the close.

Now That We're Bulking Up the Portfolio,

It's Time to Put on Some Downside Risk

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At Least Somebody Has a Sense of Humor!

Featured Trades: (THE BUBBLE HAS BURST IN BONDS TOO), (TBT), (TLT)

3) Time to Double Up on the (TBT). I have mentioned in recent days that the stock market is close to fully discounting a recession that isn't going to happen. The bond market is saying that recession is a certainty, that we are already well into it.

I think the bond market has got it wrong this time, or is at least early by a year. So I am going to double up my position in the ProShares Ultra Short Lehman 20+ Year Treasury ETF (TBT), the 200% leveraged fund that profits when Treasury bond prices fall and yields rise.

The price movements in the bond market have been so extreme that they have reached multigenerational highs. You have to go back to 1946 to find yields this low, or so historians tell me.

Take a look at the charts below. Even if I am dead wrong, there is still room for a five point rally in the TBT and still maintain its down trend. This is the five points that I am shooting for right now. If I am right, then we are seeing the beginning of a rally that will take yields back up to 4.10%, and the (TBT) back up to $43.

That gives us a potential gain of 80%. Worst case, yields plummet to 1.80%, knocking another 10% off the (TBT). This is the kind of risk reward that I am looking for, 8:1 in my favor.

There is another point to mention here. With the 30 year bond now yielding 3.5%, the cost of carry of the (TBT) has dropped to around 7.5%, the lowest it has ever been. This is down from the 11% carry we saw only six months ago. This ETF has never been such a bargain.

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