?I look at the Fed and think we?re partying like its New Year?s Eve, 1999. We?re drinking booze, and taking tequila shots. They have the pedal pressed so far down, I know it?s going to end badly. When rates go higher, they are going to go so much higher than people anticipate that there will be significant collateral damage,? said Joe Lavorgna, Deutsche Bank Chief Economic.
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. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
Global Market Comments
February 4, 2013
Fiat Lux
Featured Trade:
(GOLDILOCKS DELIVERS A NONFARM PAYROLL),
(SPY), (SPX), (DOW),
(FEBRUARY 6 GLOBAL STRATEGY WEBINAR),
(LOOK AT THAT YEN!), (FXY), (YCS)
Does it get any better than this? First, the hometown San Francisco Giants win the World Series in a four game sweep. Then the San Francisco 49er?s play in the Super Bowl. Finally, I win the World Series/Super Bowl of investing by capturing an absolutely pyrotechnic 21% year to date performance, boosting me once again the top ranks of the hedge fund industry. Hey, two out of three is not bad. 31-34, ouch! Life is good.
Back in the real world, traders were humming the rhythms of Lauren Hill?s Doo Wop on Friday, the top selling hit of 1998. That was the last time that a January posted such a virile stock market performance. In London they were humming Donna Summer?s This Time I Know It?s for Real, who led the charts with this tune in 1989, the previous time the FTSE 100 delivered such robust numbers.
No, this is not a compilation of Golden Oldies. Not too hot, not too cold. That was the conclusion of the equity markets on Friday when the Dow blasted over 14,000 for the first time in 5 years. With many researchers expecting a January nonfarm payroll over 200,000, you would think traders would have dumped shares on a 157,000 print. The headline unemployment rate remained etched in stone at 7.9%. Instead, stocks gapped up at the opening and never looked back, closing at the highs, up 147.
The phone lines between Wall street and San Francisco burned up with portfolio managers and investment advisors trying to figure out why. It appears that the number was strong enough to maintain a tepid 2% GDP growth rate. But is was not so expansionary as to prompt the Federal Reserve to abandon is quantitative easing policy any time soon, on which risk assets everywhere have been richly feasting.
I can see a particular psychology taking hold on Wall Street. Good data is proof that our buying of shares with reckless abandon is justified. Bad data is written off as a backward looking, one time only, statistical anomaly, as we saw with the incredibly weak Q4, 2012 GDP report of -0.1%.
In this scenario, the market either goes up, or goes up more. A new, all time high for the Dow this week looks like a done deal. We could hit my 2013 target of a Standard and Poor?s (SPX) of 1,600 by March. Like my friend, hedge fund giant, David Tepper, says ?When there?s a bubble, act bubbly.?
Our Course, I warned you all this was coming as far back as October (click here for ?My 2012-2013 Stock Market Forecast? ). I followed up with my ambitious ?Why My Shorts are Missing? in December, pressing the point home (click here ). Then, I really went out on a limb in my ?2013 Annual Asset Review? (click here), arguing that we would see an unprecedented market multiple expansion in the face of weak earnings growth. That is exactly what we got.
It is a good thing that I put my money where my mouth was. That has earned followers of my Trade Alert Service a blistering year to date performance of 21%. If the latecomers, short coverers, and lemmings keep pouring into this market, I could double that by April.
The Trend is Your Friend in Weekly Jobless Claims
Ten Years of Nonfarm Payroll
Looks Like It?s Rising to Me
All of those years spent living in rabbit hutch sized apartments, getting hand packed by white gloved railway men into rush hour train cars, and learning an impossible language, are finally paying off.
I have to tell you, I really have to think hard to recall a plunge in a major currency that has been as dramatic as the yen?s over the past two months. Since the Mid-November route began in earnest, the cash market has collapsed from ?76.80 to ?92.60 to the dollar. That has taken the ETF (FXY) down from $126.30 to an eye popping $105.50. The double leveraged short ETF (YCS) soared from $42 to $57.93. It?s a good thing that I was short the entire time.
In fact, I have devoted 20% of my entire capital to short yen plays since the beginning of the year. Newly elected Prime Minister, Shinzo Abe, was my willing coconspirator this week, announcing one of the most ambitious, expansionary budgets in history. The vice governor of the Bank of Japan chipped in, suggesting that the yen had more room to fall. Another senior government official suggested that ?100 to the dollar might be a reasonable target. It seems that any time someone in Tokyo says ?boo?, another round of yen selling by traders ensues.
But like all good things, this trade is getting rather long in the tooth. I?ll tell you how this is going to end. When the cash market declines to ?96 to the dollar, the grumblings about unfair import competition by the US car industry will escalate to an uproar. At ?100 to the dollar it will balloon into a full blown trade dispute. So get ready to start hearing a lot about Japan?s unfair manipulation of their currency to undervalued levels, especially from congressmen from Midwest states with large car plants.
The yen will probably fall short of that. The last time this happened, in the early 1990?s, the US was afraid that Japan was taking over the world. Our country was recoiling from a Japanese share of the American car market that had ratcheted up from 1% to 43% in just 20 years. Remember the tome ?Japan is Number One?? You have to laugh now.
Those fears abated long ago. A Japanese collapse on the scale of an IMF bailout is now much more likely than Japanese dominance. It?s tough to smack down an international competitor that is trying to claw its way up after 20 years on the mat. One complicating factor this time is that the principal lobbyist against a stronger yen is now US government owned, General Motors (GM).
I get emails every day from readers asking if they should initiate, double up, or triple up their short positions in the yen. As of today, I am saying no more. My best-case scenario had Japan?s beleaguered currency plunging to ?92 over the course of the next several months. Here we are over that figure in just ten weeks. So at best, a short yen position is a ?HOLD? here. Don?t chase it any more. Remember, hogs get fed, but pigs get slaughtered.
Japan is not an entirely bad place. Certainly the world would be a duller, more boring place without sushi, sake, hot tubs, and karaoke. And I never heard anyone complain about those coed public baths. Too bad I could never find a pair of sandals that fit.
Six Month Chart
Five Year Chart
?The January effect has been supercharged this year and needs to be checked for doping,? said Sandy Lincoln from BMO Asset Management.
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. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
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. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
Global Market Comments
February 1, 2013
Fiat Lux
Featured Trade:
(TRADE ALERT SERVICE POSTS BLAZING 16.75% JANUARY GAIN),
(LUNCH WITH SUPREME COURT JUSTICE SONIA SOTOMAYOR),
(TESTIMONIAL)
The Trade Alert Service of the Mad Hedge Fund Trader posted a
16.75% profit in January, an all time monthly high. The 26-month total return has punched through to 71.80%, compared to a miserable 10% return for the Dow average. That raises the averaged annualized return to 33.13%, elevating to the top of the hedge fund ranks.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service, daily newsletter, real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
