When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
Global Market Comments
July 31, 2019
Fiat Lux
SPECIAL FIXED INCOME ISSUE
Featured Trade:
(ITALY’S BIG WAKE UP CALL),
(TLT), ($TNX), (TBT), (SPY), ($INDU), (FXE), (UUP), (USO),
(WELCOME TO THE DEFLATIONARY CENTURY),
(TLT), (TBT),
Those planning a European vacation this summer just received a big gift from Mario Draghi, the outgoing president of the European Central Bank. His promise to re-accelerate quantitative easing in Europe has sent the Euro crashing and the US dollar soaring.
Over the last two weeks, the Euro (FXE) has fallen by 2.5%. That $1,000 Florence hotel suite now costs only $975. Mille Gracie!
You can blame the political instability in the Home of Caesar, which has not had a functioning government since WWII. The big fear is that the extreme left would form a collation government with the extreme right that could lead to its departure from the European Community and the Euro. Think of it as Bernie Sanders joining Donald Trump!
In fact, Italy has had 62 different governments since WWII. They change administrations like I change luxury cars, about once a year. Welcome to European debt crisis part 27.
I can’t remember the last time markets cared about what happened in Europe. It was probably the first Greek debt crisis in 2011. As a result, German ten-year bunds have cratered from 0.60% to -0.40%. But they care today, big time.
Given the reaction of the global financial markets, you could have been forgiven for thinking that the world had just ended.
US Treasury Bond yields (TLT) saw their biggest plunge in years, off 120 basis points to 2.05%.
Even oil prices collapsed for an entirely separate set of reasons, the price of Texas Tea pared 20% since April on spreading global recession fears.
Saudi Arabia looks like it's about to abandon the wildly successful OPEC production quotas that have been boosting oil prices for the past year. Iran has withdrawn from the nuclear non-proliferation treaty, responding with an undeclared tanker war in the Persian Gulf, which I flew over myself only a few weeks ago. The geopolitical premium is back with a vengeance.
So if the Italian developments are a canard, why are we REALLY going down?
You’re not going to like the answer.
It turns out that rising inflation, interest rates, oil and commodity prices, the US dollar, US national debt, budget deficits, and stagnant wage growth are a TERRIBLE backdrop for risk in general and stocks specifically. And this is all happening with the major indexes at the top end of recent ranges.
In other words, it was an accident waiting to happen.
Traders are extremely nervous, global uncertainty is high, the seasonals are awful, and Washington is a ticking time bomb. If you were wondering why I was issuing so few Trade Alerts in July, these are the reasons.
This all confirms my expectation that markets could remain stuck in increasingly narrow trading ranges for the next six months until the presidential election begins in earnest.
Which is creating opportunities.
The global race towards zero interest has the US as the principal laggard. So you should keep buying every serious dip in the bond market.
Stocks are still wildly overvalued for the short term, so I’ll keep my low profile there. As for gold (GLD) and the currencies, I keep buying dips there as well.
So watch for those coming Trade Alerts. I’m not dead yet, just resting. The contest here is to make as much money as you can, not to see how many trades you can clock. That is a brokers' game, not yours.
Mad Hedge Technology Letter
July 31, 2019
Fiat Lux
Featured Trade:
(TIME TO TAKE A BREAK WITH GOOGLE),
(GOOGL)
It’s time to take a breather.
That is after the 9% spike in Google shares.
The best way to describe results of late for Alphabet is a mixed bag for the company helmed by Sundar Pichai.
Things aren’t going bad but not great either.
I‘ll tell you why.
Alphabet undershot its top-line revenue by about $1.7 billion, a large miss that should disturb investors.
It’s definitely not the growth company it once was even though some elements of Alphabet are still growing profusely.
Nothing better epitomizes the state of Google’s ad cash cow with its cost-per-click on Google properties from Q2 2018 to Q2 2019 falling 11% showing that they are having a harder time charging customers for clicking their stuff.
But on the bright side, paid clicks on Google properties from Q2 2018 to Q2 2019 was up 28% demonstrating the attractiveness and stickiness of platforms such as YouTube and Google Search.
Two other bright spots were its in-house lineup of smartphones called the Pixel and cloud products, which helped this segment grow to $6.18 billion compared to $4.43 billion last year.
I am actually a huge fan of the Pixel lineup even though I go with an iPhone.
If I did own an Android, I’d choose the latest Pixel with the added bonus of the convenience of Google’s best in show software.
Google is coming out with their Pixel 4 later this fall.
Pichai has never dived into the finer numbers of the Google Cloud but he took the time to mention that its cloud division is now an $8 billion and growing business annually.
Alphabet plans to heavily hire an army of warm bodies tripling the cloud staff for their successful cloud unit which is poised to be a mainstay growth driver for Google.
Looking at the imminent future, there are a few bogies in the sky.
The Australian Competition and Consumer Commission is part of a growing chorus of domestic and international regulators looking to subdue Google’s big data businesses.
The best-case scenario is more fines in the billions of dollars and the worst case is shriveling access to certain lucrative end markets.
Alphabet has been hard hit by the trend of more stringent global data regulations, and this is just the beginning.
Facebook appears as if it's in a deeper quagmire with multiple regulatory commissions state side smelling blood in shark-infested waters.
There is part of the argument that these practices stem from Alphabet being too dominant and there is some truth in this.
They are literally gunning for the entire internet whether it be travel or eCommerce.
I would say from my experiences with Alphabet that they do push the threshold a tad bit far.
They probably do not need to preinstall YouTube and Google Chrome on Android Devices without the inability to delete them.
If you have tried to delete these apps from Android devices, you are stonewalled, but I do hold the view that users will naturally come to the conclusion these apps are utilities and would download them if not preinstalled in the first place.
Alphabet should be more comfortable in its expertise and leadership position.
After a rapid run-up in share appreciation, Alphabet is due for a short-term pullback which could materialize soon because of regulatory fears.
Traders should look at some short duration bear put spreads on Alphabet.
I am long-term bullish Alphabet.
“The right moral compass is trying hard to think about what customers want.” – Said CEO of Google Sundar Pichai
"Everything is expensive now. Worries about the future can cause safe assets to become highly-priced...I call it the 'Titanic Effect.' When the Titanic was going down, people would pay a fortune for anything that floats. We may be in a Titanic situation now," said my buddy, Nobel Prize winner Robert Shiller.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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
When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to a 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