While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
Global Market Comments
October 30, 2013
Fiat Lux
Featured Trade:
(WHEN GREAT MINDS THINK ALIKE), (SPY),
(HEDGE FUNDS CIRCLING OVER THE EUROPEAN WRECKAGE),
(BWX), (IGOV), (ITLY), (EU), (BUND), (FXE),
(TESTIMONIAL)
SPDR S&P 500 (SPY)
SPDR Barclays International Treasury Bd (BWX)
iShares International Treasury Bond (IGOV)
PowerShares DB Italian Treas Bond ETN (ITLY)
WisdomTree Euro Debt (EU)
PIMCO Germany Bond Index ETF (BUND)
CurrencyShares Euro Trust (FXE)
Exactly 84 years ago from yesterday, the Great 1929 stock market crash occurred. The Dow Average plunged a stunning 30 points to 230, a one-day decline of 12%. The ticker tape lagged the market by two hours, and the newly bankrupt were jumping out of downtown windows. I remember it like it was yesterday.
Well not really.
But a number of friends over the decades lived through that fateful day, and relived it for me, men like Sir John Templeton and Tubby Burnham. My grandfather prided himself on never buying a stock in his life, and was deluged by entreaties from reckless and freshly busted relatives to move into his Bay Ridge, Brooklyn basement.
The S&P 500 came just eight points short of my 2013 target of 1,780 yesterday. By the time you read this, it may already be there.
To refer back to my many pleadings for you to load the boat with US equities, please click here to read ?Why US Stocks Are Dirt Cheap? and ?My 2013 Stock Market Outlook?.
When I made this prediction in January, abuse was hurled upon me. Clearly, the sequester, debt ceiling crisis, taper, sluggish economic growth, a China crash, and a government shutdown were going to collapse the market, taking the (SPX) as low as 300. Gold was the safe place to be, I was told. The only way I could conclude that stocks were headed northward was if I was smoking one of California?s largest agricultural products.
It turns out they were right, but only if you hold your charts upside down.
So it was with some amusement that I listened to the comments of Dr. Jeremy Siegel of the Wharton School of Business. He has been one of the most unremittingly bullish commentators all year, to the point of becoming a Wall Street laughing stock. There is only one catch: he has been dead right. And when people are that right, I sit up and take notice.
Dr. Siegel?s view on the economy mirrors my own. The absence of further spending cuts and tax increases should enable US GDP growth to spring from 2% to 3.5%. At that robust rate the Federal Reserve could completely eliminate quantitative easing with no serious market impact. All surprises will be to the upside. Only a ten year Treasury yield falling to 2% would signal that this scenario has run off the rails.
The Federal Reserve will keep interest rates ultra low for longer than most expect because of its mortal fear of deflation. Endemic and structurally falling prices have the effect of increasing the real debts of individuals and corporations. The central bank clearly wants debt loads to move in the other direction.
While major entitlement reform poses some risk, the likelihood is that the committee convened to make recommendations will simply kick the can down the road, well past the 2014-midterm elections. That?s because both parties believe they can then gain the upper hand. Only one of them can be right.
Dr. Siegel observes that November and December have the calendar working for them as historically positive months. There will be an extra tailwind coming from highly favorable Q4 YOY earnings comparisons. Dividends are up a healthy 10%-15% YOY, and will continue to improve. This action should spill into the first half of 2014.
There is no doubt that the taper has been delayed. In fact, there are no major uncertainties of any kind until well into next year. Periodically, premature fears of tightening will trigger market setbacks. But they will be of the smaller kind, typically 4%-7%.
Welcome to the Goldilocks market.
The only development that could bring this parade to an end would be a second and more prolonged government shutdown, possibly as early as January. But the Republicans have been severely chastised for their behavior in the opinion polls, so it is highly unlikely we will see a repeat, unless we are about to become a one party state.
Welcome to the Goldilocks market.
Welcome to the Goldilocks Market
Have you ever wanted to spend your summers basking in the sunlight at your mountain top Tuscan villa, surveying the manicured vineyards which produce your own estate bottled wine? Are you drawn by the cachet of claiming George Clooney as a celebrity neighbor on the model strewn shores of Lake Como? How about a luxury apartment that is walking distance from the Vatican?
Hedge fund managers are salivating at the prospect of one of the greatest fire sales in history, as assets of every description were being dumped in the wake of the hard times that hit Europe. On the menu are trillions of dollars of distressed loans hived off by desperately downsizing and deleveraging continental banks. Corporations are expected to dump money losing divisions and subsidiaries in a race to raise cash.
In many respects, these deals of the century represent the second shoe to fall after similar bargains were had in the US during the 2008 crash. Europe?s day of reckoning was postponed by four years, thanks to a recovery in the US, QE1, QE2, QE3, and Federal Reserve policies that kept interest rates at century lows.
The complacency in Europe since then has been staggering, with many turning their noses up, claiming it could never happen there. Some are predicting that the balance sheet scrub could take as long as a decade, similar to Japan?s tortuously long repair of its own banking system.
Some hedge funds are taking advantage of the wholesale withdrawal of European banks from the credit markets to beef up their own international lending?at much higher interest rates. The same funds, like Highbridge, similarly locked in enormous spreads in the US when conditions were dire.
Several American private equity firms are said to be setting up new European distressed asset funds to peddle to pension funds and high net worth individuals. Those who made similar investments in the US four years ago, made fortunes.
For individual investors the easiest and ripest pickings may be among the European bond ETF?s that already trade in the market. Many of these have suffered gut churning declines in recent months as the European melt down unfolded, despite offering yields multiples of what can be found at home.
Below is a short list of continental ETF?s you may want to consider:
PowerShares DB Italian Treasury Bond Fund (ITLY)
Wisdom Tree Euro Debt Fund (EU)
iShares S&P Citigroup International Treasury Bond Fund (IGOV)
SPDR Barclays Capital International Treasury Bond ETF (BWX)
Germany Bond Index (BUND)
Of course, the eternal question of when to buy is the open to debate. There have been enormous declines in European bond yields since the peak. It was a simple shortage of paper, not any ECB intervention that drove yields down so rapidly.
Aggressive traders are already starting to scale in.
The Fat Lady Has Sung for the European Bond Market
Hey, Neighbor!Dear John,
I'm extremely passionate about markets and am already building a hedge fund at the age of 31. Please continue to be yourself and inform. I want to learn from you all I can to successfully understand the next likely moves based on your insights and reasoning. I just wish you were my uncle and could give me years of one on one time to teach me how to fish.
Thanks for the privilege. Please be accurate next year also! ;-).
Byron
Brisbane, Australia
?If you can?t catch the most extraordinary event in our lifetimes, what do we really know? How in the world did I miss it?? said Alan Greenspan, former chairman of the Federal Reserve.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more