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
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
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
January 7, 2016
Fiat Lux
Featured Trade:
(THE NEW COLD WAR)
(AN EVENING WITH CONGRESS BARNEY FRANK),
(TESTIMONIAL)
One of the highlights of last year?s SkyBridge Alternatives Conference was the blowout party on Wednesday night (click the following for the blow by blow description at http://madhedgefundradio.com/report-on-the-skybridge-alternatives-conference/).
Seeking refuge from a band that was blasting my ears out, and fleeing the nubile young bodies that kept bumping up against me and spilling my margaritas, I sought out a safe haven.
There, cloistered in the quietest, darkest refuge from the event, far beyond the most distant swimming pool and palm tree, I found former congressman, Barney Frank, sitting in a lounge chair.
If this name piques your memory, it is because Barney was a co-sponsor of the 2011 Dodd-Frank bill, the most sweeping regulation of the financial industry since the Securities Act of 1933.
As chairman of the House Financial Services Committee, he became a familiar figure during the endless hearings for the controversial legislation.
To say that Barney is a man with strong opinions is probably the understatement of the century. If you voice an opinion he believes is factually incorrect, he will shout you down until he has the last word.
I watched him do exactly that when he sat on a discussion panel with republican strategist, Carl Rove. The two went at it like cats and dogs for ten minutes, the rest of the participants sitting there aghast, with their mouths hanging open.
Barney is upset that the US is still spending massively to defend Europe 22 years after the collapse of the Soviet Union, their only real enemy. The continentals can easily afford to pick up the tab themselves. The US has vastly overextended itself with military commitments. We can no longer afford to be the world?s policeman.
Sunni and Shia Muslims have been hating each other for a thousand years. We are not going to change that in a few years of spending a few trillion dollars and thousands of lives.
You can?t use the US military for social engineering. Attempting to do so just pisses everyone off and only creates more American enemies.
Banks are now bigger than they were before the financial crisis, largely because the government required them to post more capital. But ?too big to fail? has been solved.
The new Resolution Authority has the power to wipe out shareholders in the wake of future poor business decisions. That did not exist in 2008. No more bonuses will be paid for large losses.
Corporate tax reform is a big priority, but is far more difficult than people realize. The people you take money away from get much angrier than the beneficiaries of change are made happy. That is a problem in the current big money election environment.
Son of a New Jersey truck stop operator, Barney went on to obtain a degree from the Harvard Law School. He entered politics in 1972 when he joined the Massachusetts House of Representatives. Frank was elected to congress in 1980, representing the western Boston suburbs. He went on to win reelection 12 consecutive times.
Frank first went to Washington about the same time as I joined the White House Press Corps as a correspondent for The Economist magazine. I didn?t know him personally, but shared with him his frustration in trying to explain economic issues to then President Ronald Reagan.
When I asked the president from my home state of California why his tax cuts gave himself the largest percentage reduction, he answered that ?It?s because I pay the most taxes.? Go figure.
What I found most fascinating about Barney was his recollections of the Boston political scene during the 1960?s. In the past year, I have read biographies on John Kennedy, Robert Kennedy, Ted Kennedy, and the most interesting, their father, Joe Kennedy.
If you ever want to gain insight into one of history?s best natural traders, finest businessmen, and the first chairman of the SEC, read The Founding Father by Richard Whalen. Barney knew all of these men, and listening to his first hand stories about them was a real education.
All of this great information came at the price of sitting downwind from his cigar smoke for two hours. As a journalist, I long ago learned that if you want to get the real dope, you sometimes have to pay the price.
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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
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
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
January 6, 2016
Fiat Lux
Featured Trade:
(IT?S TIME TO PICK UP SOME GOLD),
(GLD), (GDX), (ABX), (NEM),
(TESTIMONIAL)
SPDR Gold Shares (GLD)
Market Vectors Gold Miners ETF (GDX)
Barrick Gold Corporation (ABX)
Newmont Mining Corporation (NEM)
I have not done a gold trade in yonks. That?s because it has been the asset class from hell for the past five years, dropping some 46% from its 2011 $1,927 high.
However, we are now in a brave new, and scarier world.
Given the extreme volatility of financial markets in recent months, all of a sudden keeping hedges on board looks like a good idea. I?m sure the next time stocks take a big dive, the barbarous relic will post a double digit gain.
So, this makes it an excellent hedge for my outstanding long S&P 500 (SPY) and short Treasury (TLT) ?RISK ON? positions.
Also supporting the yellow metal is what I call the ?Big Figure Syndrome?. And there is no bigger number than $1,000, the upper strike on this trade.
While rising interest rates is always bad for gold, the realization is sinking in that it is definitely NOT off to the raises now that the Federal Reserve has at last begun a tightening cycle.
Personally, I expect ?one and done? to gain credence by midyear, once implications of six months of Fed inaction starts to sink in. As long as rates rise slowly, or not at all, we have a gold positive environment.
The Treasury bond market has already figured this out, with yields now lower than when the Fed carried out its 25 basis point snugging.
In addition, gold has recently found some new friends. Russia has come out of nowhere in recent months and emerged as one of the world?s largest buyers. This is because economic sanctions brought down upon them by the invasion of Crimea and the Ukraine is steering them away from dollar assets.
Keep in mind that this is only a trade worth about $200 to the upside. Then, I?ll probably sell it again.
I am avoiding the Market Vectors Gold Miners ETF (GDX) for now, as the next stock market swoon will take it down as well, no matter what the yellow metal does.
But get me a good price and a rising stock market, and I?ll be in there with another Trade Alert.
My interest might even expand to include the world?s largest gold miners, Barrick Gold (ABX) and Newmont Mining (NEM).
The new bull market in gold is still at least five years off. That?s when it picks up a huge tailwind from a massive demographic expansion by the Millennials, which eventually leads to much higher inflation.
Also by then, China and other emerging nations will begin to raise their gold reserve holdings to western levels. This will require the purchase of several thousand metric tonnes! That?s when my long-term forecast of $5,000/ounce will finally come true.
With conditions as grim as they were in 2015, you would have thought the price of gold was going to zero.
It didn?t.
While no one was looking, the average price of gold production has soared from $5 in 1920 to $1,300 today. Over the last 100 years, the price of producing gold has risen four times faster than the underlying metal.
It?s almost as if the gold mining industry is the only one in the world which sees real inflation, which has seen costs soar at a 15% annual rate for the past five years.
This is a function of what I call ?peak gold.? They?re not making it anymore. Miners are increasingly being driven to higher risk, more expensive parts of the world to find the stuff.
You know those tires on heavy dump trucks? They now cost $200,000 each. Barrick Gold (ABX) didn?t try to mine gold at 15,000 feet in the Andes, where freezing water is a major problem, because they like the fresh air.
What this means is that when the spot price of gold falls below the cost of production, miners will simply shout down their most marginal facilities, drying up supply. That has recently been happening on a large scale.
This inevitably leads to a shortage of supply, and a new bull market, i.e., the cure for low prices is low prices.
They can still operate and older mines carry costs that go all the way down to $600. No one is going to want to supply the sparkly stuff at a loss.
That should prevent gold from falling dramatically from here.
I am constantly barraged with emails from gold bugs who passionately argue that their beloved metal is trading at a tiny fraction of its true value, and that it is really worth $5,000, $10,000 or even $50,000 an ounce.
They claim the move in the yellow metal we are seeing is only the beginning of a 30-fold rise in prices similar to what we saw from 1972 to 1979, when it leapt from $32 to $950.
To match the 1936 monetary value peak, when the monetary base was collapsing and the double top in 1979 when gold futures first tickled $950, this precious metal has to increase in value by eight times, or to $9,600 an ounce.
I am long term bullish on gold, other precious metals, and virtually all commodities for that matter.
The seven year spike up in prices we saw in the seventies, which found me in a very long line in Johannesburg, South Africa to unload my own Krugerrand's in 1979, was triggered by a number of one off events that will never be repeated.
Some 40 years of demand was unleashed when Richard Nixon took the US off the gold standard and decriminalized private ownership in 1972. Inflation then peaked around 20%. Newly enriched sellers of oil had a strong historical affinity with gold.
South Africa, the world?s largest gold producer, was then a boycotted international pariah and teetering on the edge of disaster. We are nowhere near the same geopolitical neighborhood today, and hence my more subdued forecast.
But then again, I could be wrong.
The previous bear market in gold lasted 18 years, from 1980 to 1998, so don?t hold your breath.
What should we look for? When your friends start getting surprise, out of the blue pay increases, the largest component of the inflation calculation. That is happing now in the technology and the new US oil fields, but nowhere else.
It could be a long wait, possibly into the 2020?s, until shocking wage hikes spread elsewhere.
Ready For a Bounce
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