Global Market Comments
October 29, 2014
Fiat Lux
Featured Trade:
(WHY WARREN BUFFETT HATES GOLD),
(GLD), (ABX),
(DINNER WITH ELIOT SPITZER)
(GRAPES OF WRATH REDUX),
(TESTIMONIAL)
SPDR Gold Shares (GLD)
Barrick Gold Corporation (ABX)
I couldn?t for the life of me figure out why New York?s former governor and federal prosecutor, Eliot Spitzer, wanted to invite me to dinner. He wasn?t flogging a book or promoting a movie, and he certainly wasn?t running for office again. But I went anyway, thinking perhaps the notorious ?Client No.9? might let me peek at his famous black book.
Eliot, who showed up wearing a classic New York blue pin stripped suit that seems oddly out of place in San Francisco, is currently running his family?s commercial real estate business.
He told me that the advantages that the US enjoyed over the rest of the world in 1945, such as a monopoly in skilled labor, are now long gone. The driver of the world economy has switched from America to Asia in the nineties.
As a result, income distribution here has morphed from a bell shaped curve to a barbell, with both the wealthy and the poor increasing in numbers, squeezing the middle class. The financial crisis compressed 30 years of change into two, taking us from libertarian Ayn Rand to pay Czar Ken Feinberg in one giant leap.
Having cut his teeth prosecuting the Gambino crime family in the eighties, Eliot had some views on the need for more regulation. We only need to enforce the laws on the books, not pass new ones. The ?white collarization? of organized crime has been a secular trend since the sixties.
He said the ethical lapses in the run up to the crash were best characterized by a quote from Merrill Lynch?s Jack Robins; ?What used to be a conflict of interest is now a synergy.?
AIG getting 100 cents on the dollar from the federal government was the greatest scam in history. The US did not extract a high enough price from top paid executives and shareholders of financial institutions for failure, and should have let more firms go under.
As for his own scandal, Eliot admitted that he failed, that his flaws were made publicly apparent, and that other politicians should be smarter than he was.
Although Eliot had some good ideas, I was still puzzled over what this was all about as I ploughed through my cr?me brulee. Perhaps the governor has a pathological need to be in front of the spotlight, even at the risk of flaming out.
And no luck with the black book.
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. Read more
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. Read more
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. Read more
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. Read more
Global Market Comments
October 28, 2014
Fiat Lux
Featured Trade:
(GOLDILOCKS IS BACK!), (SPY), ($INDU),
(CHINA?S VIEW OF CHINA),
(FXI), (EEM)
SPDR S&P 500 ETF (SPY)
Dow Jones Industrial Average ($INDU)
iShares China Large-Cap (FXI)
iShares MSCI Emerging Markets (EEM)
Her red Tesla is parked in the driveway, her potted plants are back on the balcony, and the closet is once again filled with designer shoes.
Goldilocks is back!
It?s not like she was ever going to be gone for long. Once a woman of a certain maturity gets accustomed to the lifestyle of the rich and famous, it?s hard to give up the better things in life.
However, there were some doubts.
When the Dow Average opened down 400 points on October 15, a gigantic capitulation move saw $70 billion worth of stock sold at market at the absolute low of 15,850, and a spectacular 315 million shares of the S&P 500 ETF (SPY) were unloaded.
One might have thought that Goldilocks had changed her name and moved into a nunnery for good.
It was not to be.
The rally that ensued off of that print was one of the most ferocious in history. After having cleaned out hedge fund trader longs on the downside, the market then ripped their faces off on the upside.
It has not been a good year for hedge funds. It has been a fantastic year for high frequency traders, with September the most profitable month in the history of this arcane, computer trading strategy.
As for me, I never had any doubt that Goldilocks was coming back. As I miraculously pound into my followers on a daily basis, it?s all about the numbers. It?s always about the numbers.
The strength of the economy is such that the sudden 10% swoon we witnessed was in no way justified. All that was really required was that an extreme overbought condition in stocks we say six weeks ago be remedied. Now that is done, it is up, up, and away.
Corporate earnings obliged, with an eye-popping 80% delivering upside surprises. Corporate earnings are now growing at a robust year on year 11% annual rate.
Instead of focusing in on Ebola, Russia and ISIS, traders are now looking at improving Purchasing Managers Indexes in both Europe and China. The Middle East has gone quiet. There were even rumors, later quashed, of an extended quantitative easing for the US.
The European Central Bank announced the results of its bank stress test, and guess what? Almost everyone passed! Only 12 banks need to raise $12 billion in new capital.
Of course, this was never more than a window dressing exercise designed to make us all feel warm and fuzzy about the beleaguered continent.
It worked!
Capital spending also remains robust for the first time in eight years. But I think most analysts are missing the reason why this is happening. It is too late for companies to add capacity for this economic cycle.
They are instead building factories now to accommodate demand for the next economic and financial boom in the early 2020?s, when the stiff demographic headwind created by the baby boomers flips to a brisk tailwind provided by the Gen Xer?s.
The true 800-pound gorilla on the trading landscape these days is the price of oil, which broke the $80 handle yesterday morning. As with every move by every financial instrument everywhere, the more it goes down, the more dire the forecasts become. The savings in energy costs at this level amount to $12,000 per family per year. Do the math.
$10 a barrel? Really?
I think it is safe to say, like interest rates, energy prices will stay lower for longer than anyone imagines possible. So add another 1% to US GDP growth this year, next year and the one after that.
When the stock market figures this out, new highs will follow, probably before year end.
Has Goldilocks Moved Back in For Good?
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
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. Read more