We are about to get some wild, seasonal gyrations to the jobs numbers, and I think you will be well advised to know about them in advance.
A large part of our economy is moving online more rapidly than most people and governments realize. According to ComScore, a marketing data research firm, online sales leapt by 15% to $35.3 billion during the last November-December holiday period, an all-time high.
I speak from a position of authority here as I happen to run one of the most successful financial sites on the Internet, which I kicked off four years ago with a $500 investment.
Much of this migration is being captured by FedEx and UPS, the nexus at which Internet commerce meets the real world. After all, virtual products require a real world delivery. This explains why the couriers are seeing a booming business in an otherwise flat economy. FedEx (FDX) hired 10,000 temporary workers to deal with the last Christmas surge in 2012, a gain of 18% over the same period the previous year. UPS added a stunning 55,000, a 10% increase.
Watch for the other shoe to drop. That will become apparent when that the newly hired become the newly fired, leading to a sudden and rapid deterioration of the jobs data. This could be the information the stock market and other risk assets need to put in a top for the year. The scary part is that this may happen sooner than you think.
Yup, I Just Got My Pink Slip Too
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Call me a nerd, but instead of spending my Sundays watching football, I pour over data analyzing the monetary aggregates. That?s a tough thing to say for someone whose dad was a lineman on the University of Southern California?s legendary 1947 junior varsity football team.
This is so I can gain insights into the future performance of assets classes. What I am seeing these days is not just unusual, it?s bizarre. Call it a double reverse, a Hail Mary, and a Statue of Liberty all combined into one.
You can clearly see the impact of QE2 at the end of 2010 on the chart below, which caused the monetary base to explode and triggered a six month love fest for all risk assets. Hard asset prices, like energy, commodities, the grains, and precious metals did especially well, leading to fears of resurging inflation. This prompted the European Central Bank to commit a massive policy blunder by raising interest rates twice. The US dollar (UUP) was weak for much of this time.
When quantitative easing ended in June of that year, not only did the base stop growing, it started shrinking. Hard assets rolled over like the Bismarck, and gold peaked in August. No surprise that when you take away the fuel, the fire goes out. And guess what else happened? The dollar began an uptrend that continues unabated.
So what happens next? Given the continuing strength of the economic data, I think that the prospects of a taper have been greatly diminished. Not only has it been taken off the back burner, the flame has been extinguished and the pot put back into the cupboard.
Needless to say, if this trend continues it will have an inflationary impact on the global economy as a whole, and ?RISK ON? assets specifically. It?s simply a question of supply and demand. Print a lot more dollars and you create a supply shortage of other assets, forcing bidders to pay up.
Dad Was Always a Great Monetarist
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?Housing in terms of price has put in a real bottom. I?m not looking for a housing bull market. We are in the second phase of a housing bear market. But the good news is that we can correct the rest of the way back to the long term trend through time, rather than price on a national basis,? said Josh Brown, a real estate analyst.
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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
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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
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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
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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
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Featured Trade: (CASHING IN ON OBAMACARE), (XLV), (GILD), (AET), (WPT), (THE FLASH CRASH RISK IS RISING), (SPX), ($INDU), (TESTIMONIAL)
Health Care Select Sector SPDR (XLV)
Gilead Sciences Inc. (GILD)
Aetna Inc. (AET)
World Point Terminals, LP (WPT)
S&P 500 Index (SPX)
Dow Jones Industrial Average ($INDU)
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Not a day, an hour, or a minute goes by without the media blasting at me about how terrible Obamacare is. I wondered, how terrible can it be? There?s got to be a trade in there somewhere.
After intensively researching several industries I concluded that the investment opportunities created by the president?s signature legislative accomplishment are absolutely massive. The health care industry is about to get 30 million new customers with government guaranteed payments. Ten?s of millions more are being driven into the arms of the private health insurers as well. It?s almost the same gravy train that the defense industry has been living off of for the past 75 years.
The stock market has been screaming as much at us all year. Take a look at the Health Care Select Sector SPDR ETF (XLV), which has been rocketing for the past three years. Its ascent accelerated on October 1, when Obamacare officially kicked in.
You will also find the same windfall is showering upon the health insurance industry. The shares of the second largest company in the country, WellPoint (WLP) have soared by 68% this year, while the fourth biggest (AET) is up an impressive 40%.
The speeches claiming that Obamacare is a failure were written in September, before the program ever started. Not, September, 2013, but September, 1936, when Republicans fought tooth and nail against Social Security. The speeches are almost identical, word for word. I?m not kidding!
In fact, insurance exchanges are one of the oldest forms of commerce, dating back to London in the 1600?s. Lloyds of London has been around since 1871, and makes a profit in most years.
It will take Obamacare a decade to become fully operational and actuarially sound. After that it should cost the government almost nothing, just a few hundred million dollars a year for administration of the exchanges. Americans are the smartest people in the world, so there is no reason for this not to work, except political ones. In fact, ours should be better than those in Europe and Asia.
The political obstacles will fade as well. Hillary Clinton is the overwhelming front-runner for the 2016 presidential election. If elected, the earliest Republicans could repeal Obamacare would be 2025. There will probably be a liberal majority on the Supreme Court by then as well. With a 12-year track record, it is unlikely that any political party will try to repeal government-sponsored health insurance at that stage.
The stock market is also telling you that Obamacare is here to stay. Believe in the wisdom of crowds. They are usually right.
This is why the shares of entire health care and insurance industries are melting up now. This is why I want to buy into the industry now.
The easiest way to participate is through Health Care Select Sector SPDR (XLV), a basket of companies in the health care industry with a 1.71% dividend yield. Please note that a basket of stocks is going to deliver half the volatility of single stocks.
Therefore, we have to be more aggressive with the positioning to make any money, picking strikes that are closer to the money. Johnson and Johnson (JJ) is the largest holding in this fund, with a 12.8% weighting, while Gilead Sciences (GILD) is the fourth, with a 5.1% share. For a list of the largest components of this ETF, please click here https://www.spdrs.com/product/fund.seam?ticker=XLV .
As soon as the current correction ends, I?ll shoot out a Trade Alert to you as fast as the speed of light.
Health Care Select Sector SPDR ETF (XLV)
I Think I Hear a Trading Opportunity
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Those who lived through the cataclysmic ?flash crash? that occurred precisely at 2:45 pm EST on May 6, 2010, have been dreading a replay ever since. Their worst nightmares may soon be realized.
That is when the Dow Index (INDU) dropped a gob smacking 650 points in minutes, wiping out nearly $1 trillion in market capitalization. On that day, some ETF?s saw intraday declines of an eye popping 75% before recovering. A flurry of litigation ensued where many sought to break trades as much as 99% down from the last indication, some successfully.
The true reasons for the crash are still a matter of contentious debate. Many see a smoking gun in the hands of the high frequency traders who account for so much of the daily trading volume. But I happen to know that many of these guys pulled the plugs on their machines and went flat as soon as the big move started.
I think that it was the obvious result of too many people following similar models in markets with declining liquidity. The ease of instant execution through the Internet was another contributing factor. It also could be a symptom of no growth economies and lost decades in the stock market. The increasing short-term orientation of many money managers also played a hand.
Mathematicians who follow chaos theory and ?long tail events? known as ?black swans? argue that the flash crash was not only inevitable, it was predictable. They are also saying that the next one could be far worse.
Since then we have suffered several mini flash crashes. These include the recent $200 collapse in gold, a $5 plunge in silver, a five-cent gyration in the Euro, and a ten-cent gap in the Swiss franc. Notice that these ?flash? events only happen on the downside, and that we don?t have flash melt ups.
In many respects, traders and portfolio managers dodged a bullet on that fateful day. What if it had happened going into the close? Then assets would have been marked to market less $1 trillion, and the Asian openings that followed hours later would have been horrific. This could have triggered a series of rolling flash crashes around the world from time zone to time zone that would have caused several trillion more in losses. Those losses eventually did happen, but they were spread over several more months at a liquidation rate that could be absorbed by the markets.
Regulators claim that they have reduced the risks of a flash crash through the enforcement of daily trading limits across a broader range of financial instruments. I am not so sure. During a real panic, preventing people from unloading risk is almost an impossible feat. I know because I have lived through many of them.
In the meantime, the S&P 500 continues its inexorable rise well above the exact point at which the last flash crash started, at 1,160. We are now 55% above that last flash point. Avoid, like the plague, shorting leveraged naked puts on anything. It is the best way to wipe out your entire equity that I know of.
Like me, you are probably too old to start life over again with a job at McDonald?s, and they probably would take you anyway.
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