Both the major stock and bond indexes are unchanged on the year, as of this week.
Those who left on January 1 to sail a yacht around the world, engage in a research project in Antarctica, or meditate at an Ashram in India, will return today and discover that 2015 effectively didn?t happen, at least as far as the financial markets are concerned.
Index funds are still showing negative numbers, as they have to atone for management, administration, and other hidden costs. Active managers are down even more.
And who is doing worst of all?
The Masters of the Universe, like hedge fund titan Bill Ackman, who is licking 19% performance wounds this year.
I heard that Citadel?s unfortunate hedge fund manager has moved to Brazil to look for all the money he lost there.
Watch out for those aging Nazis!
So, almost everyone in the financial advisory and portfolio management industry now have two months in which to make their 2015.
Since the industry effectively shuts down on December 18, you can really shrink that down by two weeks.
WELCOME TO YOUR SIX WEEK YEAR!
Unless, of course, you read the Diary of a Mad Hedge Fund Trader, and are up a blistering 39.23% this year. I know of many who have doubled their money since January following my timely advice.
Which brings us all the eternal question of ?NOW WHAT DO WE DO??
There is absolutely no doubt that we have entered the next leg of what could eventually be an 8-10 year bull market. The S&P 500 came within 1% of a new all time high last week. New peaks are to come shortly.
Having missed the absolute bottom in share prices in October, as almost everyone else on the planet did, I looked to other asset classes to add ?RISK ON? positions. That meant selling short the Treasury bond market (TLT), (TBT) and the Japanese yen (FXY), (YCS).
Every Trade Alert in these areas have proven profitable.
As for equities, I am not inclined to chase monster 20%-30% rallies. What I will do is buy them on a nice 5%-10% dip, or after a sideways digestion type move of several weeks. November is setting up to be just that kind of month.
Looking at the S&P 500, which has major support kicking in at the 200-day moving average at $204.79, just 2.52% down from here.
Here are ten reasons why I believe the bull market in shares is still alive and well:
1) Stocks are selling at only 18 X 2015 earnings, not exactly a bargain (it?s double the 2009 low). The October rally is telling us that there will be a major rebound in earnings next year, and that GDP growth could ratchet back up to 3%. Look no further than the technology, auto, and housing industry, the three largest legs of the economy, which are all on fire.
2) The $60 plunge in oil prices from the 2014 highs is still with us. So is the windfall tax cut on consumer spending. This could add a full 1% to US GDP growth in 2016, which has essentially come out of nowhere. However, consumers are, at last, spending their money now, not banking it.
3) The Christmas selling season is setting up to be a strong one, thanks to a friendly calendar and renewed consumer confidence. Good luck standing in line at Needless Mark Up, I mean Neiman Marcus.
4) The November 4 midterm elections are still a year off, but I already know who the winner is: Gridlock. No matter who wins the presidency, they are unlikely to also capture both houses of congress. Plan for another 5-9 years of gridlock, and no change in economic policies or tax law. By then, I?ll be dead and won?t care what happens.
5) The final blow off top is in for the bond market. Expect my friend, Federal Reserve Governor Janet Yellen, to drive the final dagger through the heart of this monster with a 25 basis point rate hike at the next meeting on December 15-16. What a nice Christmas present that will be! A reversal would be very friendly for financials (BAC), (GS), which should provide new market leadership.
6) Mergers and acquisitions are continuing at a torrid pace, and are getting larger and larger. This is happening because companies see each other as cheap, not expensive, and usually happens at market bottoms. The quickest way to grow earnings in a hyper competitive world is to buy them, especially if you can obtain them at a zero cost of funds.
7) Those who aren?t merging are buying their own stock back with both hands, like Apple, at a staggering $1 trillion annualized rate. Such purchases will peak this month.
8) Volatility spikes like the ones we saw in August and September (VIX) also signal major market bottoms (see chart below). After briefly tickling $52.50 on the August 24 flash crash day, a two year high, we have made it all the way back to an unbelievable 12.5%.
9) A strong dollar demolished multinational earnings this year. While rising interest rates assure the bull market for the greenback will continue, it will be at nowhere near the rate that we saw this year. This is stock market positive.
10) Ever heard of ?Sell in May and Go Away?? Well, ?Buy in November and stay put until April? is also true. This is the first week of that cycle. October is usually the worst month of the year to sell and is not the path to untold riches.
The net net of all of this is that you can look for the S&P 500 to reach 2,300-2,400 by March, up 10%-15% from present levels.
Just thought you?d like to know.
Which One is the Democrat, and Which is the Republican?
Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-11-06 01:07:312015-11-06 01:07:31Welcome to the Six-Week Year
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 Bill Davis, 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
I remember that the highlight of my 1968 trip to Europe was always my visit to the nearest American Express (AXP) office to pick up my mail.
In those pre Internet and email days, it was the only way that a fresh faced 16 year old could stay in touch with a hand wringing family while traveling around the world.
They just wrote ?John Thomas, c/o American Express, Paris, France,? and the letters never failed to get through to me.
It was also a great place to meet other vagabonding Americans my age--of the female persuasion. At least they spoke English. Almost.
That was a very long time ago.
So I got to know well the American Express locations off the Spanish Steps in Rome, Saint Mark?s Square in Venice, Berlin?s Kurfurstendamm, and the Champs-Elysees in Paris.
I have a feeling that American Express is about to give me a warm and fuzzy feeling once again.
After being taken out to the woodshed and getting beaten senseless in the wake of getting fired by Costco, one of the biggest customers, the shares appear poised for a comeback.
We have a rare occasion where the highest quality stock in a sector with the best business model is selling cheaper than its cohorts for a series of temporary reasons.
Take a look at the charts for (AXP) and Visa (V) below, and one of the greatest pairs trades of all time may be setting up, whereby you want to buy for the former and sell short the latter against it.
At the very least, you should be taking your monster profits on Visa and rolling the money into American Express.
Since its inception in 1958, that flashy green (or platinum) piece of plastic has long been a status symbol, and owned the premium end of the credit card market.
As a result, it earns more fees and extends fewer loans than its competitors. The loans it does have enjoy a far lower default rate. There are now 107 million Amex cards in circulation, compared to only 55 million in 2001. Thank you 1%!
American Express cardholders run balances three times larger than the average Master Card holder. That?s what happens when you buy a Ferrari on your Amex card, as I once did (to get the frequent flier points).
Merchants pay very high fees, usually 5% of the purchase. That?s why many shun the card. (AXP) is currently running a credit card balance of $940 billion, versus $3.1 trillion for Visa (V).
Fees accounted for an impressive 57% of the company?s revenues, a far higher ratio than other credit card companies. Better yet, (AXP)?s fees are rising, while those of others are falling. Interest on balances brings in 15% and cardholder fees 8%.
(AXP) is expected to earn $5.8 billion in net income on $33.9 billion in revenues this year, up 9.4%. With the US economy recovering, growing by 2.6% this year and 3.0% plus in 2015, the company is in the sweet spot for capturing more profits.
Morgan Stanley estimates that cardholder spending grows at 4.5 times the US GDP growth rate. That should cause (AXP)?s earnings to double, and the stock as well. An extra tailwind will be the company?s new strategy of moving down market to expand market share.
Despite all this good news, (AXP) shares are selling at a 13.4X multiple, a discount to its industry (21X), and the main market (18X). An ambitious share buy back program should put a floor under the stock.
Part of the discount can be explained by a Justice Department suit claiming that the company overcharges merchants. Amex correctly argues that, as the smallest of the major credit card companies, it has nowhere near monopoly pricing power.
It will be interesting to see how aggressively the government pursues its action, now that attorney general Eric Holder, has moved on to retirement.
You all know by now that I think financials are the place to be for years going forward because of imminently rising interest rates. But I?ll hold back on pulling the trigger on single name long side stocks plays until the carnage in the markets abate.
When I?m ready to shoot out a Trade Alert, you?ll be the first to know.
When I do, don't even think about putting it on your credit card.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/10/John-Thomas-16-yrs-old.jpg349348Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-11-05 01:06:302015-11-05 01:06:30Keep American Express on Your Short List
https://www.madhedgefundtrader.com/wp-content/uploads/2014/01/Spider-Web.jpg254339Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-11-05 01:05:272015-11-05 01:05:27November 5, 2015 - Quote of the Day
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 Bill Davis, 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
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
Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-11-04 14:16:382015-11-04 14:16:38Trade Alert - (TLT) November 4, 2015
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 Bill Davis, 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
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-11-04 01:07:592015-11-04 01:07:59November 4, 2015
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