A short note to thank John for great information and insight. Listening to John?s ideas is awesome and I have committed to myself to keep following his research and trade ideas because the performance has been outstanding.
Regards,
Dallas
Melbourne, Australia
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
Global Market Comments
August 12, 2016
Fiat Lux
Featured Trade:
(AUGUST 17th GLOBAL STRATEGY WEBINAR),
( OCTOBER 21st SAN FRANCISCO, CA GLOBAL STRATEGY LUNCHEON),
(AN UPDATE TO THE ECONOMIST ?BIG MAC? FOREIGN EXCHANGE INDEX),
(FXY), (FXF), (FXE), (FXA), (CYB)
CurrencyShares Japanese Yen ETF (FXY)
CurrencyShares Swiss Franc ETF (FXF)
CurrencyShares Euro ETF (FXE)
CurrencyShares Australian Dollar ETF (FXA)
WisdomTree Chinese Yuan Strategy ETF (CYB)
My former employer, The Economist, once the ever tolerant editor of my flabby, disjointed, and juvenile prose (Thanks Peter and Marjorie), has released its new ?Big Mac? index of international currency valuations.
Although initially launched as a joke three decades ago, I have followed it religiously and found it an amazingly accurate predictor of future economic success.
The index counts the cost of McDonald?s (MCD) premium sandwich around the world.
I can personal confirm the top end of the index in Switzerland at $6.59 for a Big Mac. This is the price of the sandwich only, not of the full meal including cholesterol loaded French fries and a sugar and caffeine laden drink.
In Basel, Zermatt, and Geneva I dashed into shops to check prices, but didn?t buy anything. The staff there must have thought I was ?MAD,? while my traveling companions were deeply annoyed.
In fact, my doctors banned me from this heart attack on a plate years ago.
The bottom end of the Index can be found in Malaysia, where the median annual salary of only $4,500 can justify a price no higher than $1.99. There is also a cultural preference for chicken products in this Islamic country.
What are the Index's conclusions today?
The Swiss franc (FXF), the Norwegian krone, the Swedish krona, and, and the Euro (FXE) are overvalued, while the Hong Kong dollar, the Chinese Yuan (CYB), and the Thai Baht are cheap.
The US dollar (UUP) is now at the highish end of the range.
I couldn?t agree more with many of these conclusions. It?s as if the august weekly publication was tapping The Diary of the Mad Hedge Fund Trader for ideas.
I only learned last week that McDonald?s is removing high fructose corn syrup from its hamburgers. I never knew it was in there!
Still, it points to the company?s determination to move forward with healthier alternatives, as is the rest of the entire food industry.
That may partially explain the outsized performance of the shares over the past year, up 40.52%.
I am no longer the frequent consumer of Big Macs that I once was, as at my advanced age, my metabolism has slowed to such an extent that in eating one, I might as well tape it to my ass.
Price rises also haven?t helped. When my mom took her seven kids to the Golden Arches during the 1950?s, the hamburgers were ten cents apiece.
Better to use it as an economic forecasting tool than a speedy lunch.
?My experience in business helps me as an investor, and my investment experience makes me a better businessman,? said Oracle of Omaha, Warren Buffett.
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 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
Global Market Comments
August 11, 2016
Fiat Lux
Featured Trade:
(OCTOBER 7th INCLINE VILLAGE, NEVADA GLOBAL STRATEGY LUNCHEON),
(TIME TO ROTATE FROM DEFENSIVES TO CYCLICALS),
(T), (DUK), (SPG), (CAT), (X), (GE), (BAC), (TLT),
(A VERY BRIGHT SPOT IN REAL ESTATE),
(A SHORT HISTORY OF HEDGE FUNDS)
AT&T, Inc. (T)
Duke Energy Corporation (DUK)
Simon Property Group Inc. (SPG)
Caterpillar Inc. (CAT)
United States Steel Corp. (X)
General Electric Company (GE)
Bank of America Corporation (BAC)
iShares 20+ Year Treasury Bond (TLT)
As difficult as this may be to believe, we have had a defensive, ?RISK OFF? stock market for most of 2016.
It is even more incredulous, given that we tickled new all time highs for the major stock indexes only a couple of days ago.
However, after reviewing hundreds of charts, it is increasingly becoming clear that we may be seeing a sea change in sector preferences by investment advisors and money managers.
Get this one right and you will dominate the performance league tables and get more than a subscription to the ?Jelly of the Month? club from your clients at Christmas.
Miss it, and you will soon find yourself washing windshields at the nearest intersection, competing with the homeless.
To paraphrase ?Game of Thrones?, ?Winter is Going.?
It looks like the parting of the ways started in July when I was lost somewhere on the Italian railway system.
After being shunned all year, cyclicals have suddenly become the flavor of the day.
These would include major old line industrial companies like General Electric (GE) (2.94% yield), US Steel (X), (0.77% yield), and Caterpillar (CAT) (3.69% yield).
They also include financials (BAC) (1.98% yield), which have been beaten like a red headed stepchild because of the deleterious effect falling interest rates have on their P&L?s.
There are many possible reasons for the switch.
The defensive sectors that have led the market all year, like telecoms, utilities, and REIT?s, have been pursued in a relentless reach for yield. The driver here was a global collapse in interest rates across the yield curve.
A 1.33% yield on the ten-year Treasury (TLT), the low seen so far this year, covers a multitude of sins.
On this bandwagon were shares like AT&T (T) (4.47% yield), Duke Energy (DUK) (4.04% yield), and Simon Growth Properties (SPG) (3.00% yield).
The logic employed by many fund managers is to simply sell your winners and rotate into the losers.
If you are early, just let the dividends pay you some cash flow. If you aren?t, just keep scaling into rising prices.
As these sectors have lagged the market for some time, the downside risk is limited. This is no small consideration for a market that is at a seven year, all time high.
There is a growing belief that the second half will generate stronger US economic growth than the first half.
Massive and expanding quantitative easing in Europe and Asia is working it's magic, and will reduce the drag these economies have had on ours at home. Britain?s ten-year gilts just plunged to a record low 0.52% yield today.
Finally, there is that damn election. The outcome is no longer an unknown. Clinton leads by up to 15 points in the national polls and 90:10 in the betting pools.
No candidate in history has made up such a deficit with less than three months until Election Day.
The only unknown here is whether the Democrats grab the House of Representatives in addition to the Senate. The House is so gerrymandered; it is impossible to make a definitive call.
Clinton needs a minimum of 57% of the vote to pull off the trifecta. With Trump digging himself into a deeper hole daily, she may pull it off.
The financial markets are cheering this outcome. This is why we ran up to new highs ahead of my own schedule.
It?s hard to believe, but it has happened.
Legendary Fortune Magazine editor, Winslow Jones, created the first hedge fund out of a shabby office on Broadway Avenue in New York City in 1948, and generated monster returns over the next 20 years.
He got the idea of a 20% performance bonus, now an industry standard, from ancient Phoenician sea captains who kept a fifth of the profits from successful voyages. Jones must have had a historical bent.
Then came the second generation titans, George Soros, Julian Robertson, and Michael Steinhardt, who made their debut in the sixties.
I count myself among the third generation along with Paul Tudor Jones and Louis Bacon, who launched funds in the late eighties, when there were still fewer than 200 funds and $25 million was considered a lot of money.
The really big money showed up in the nineties when the pension funds found them.
After that, we suffered through the many ordeals that followed, including the collapse of Long Term Capital in 1998, the Amaranth blow up in natural gas in 2006, the Lehman Brothers bankruptcy in 2008, and John Paulson?s hair raising 50% draw down in 2011.
Today there are over 7,000 hedge funds, thought to manage some $2.73 trillion, which dominate all financial markets.
