Global Market Comments September 24, 2014 Fiat Lux
Featured Trade: (TIME TO BAIL ON THE SMALL CAPS), (IWM), (RWM), (TZA), (TSLA), (SPY), (A VERY BRIGHT SPOT IN REAL ESTATE), (THE POPULATION BOMB ECHOES), ?(POT), (MOS), (AGU), (WEAT), (CORN), (SOYB), (DE)
iShares Russell 2000 (IWM) ProShares Short Russell2000 (RWM) Direxion Daily Small Cap Bear 3X ETF (TZA) Tesla Motors, Inc. (TSLA) SPDR S&P 500 ETF (SPY) Potash Corp. of Saskatchewan, Inc. (POT) The Mosaic Company (MOS) Agrium Inc. (AGU) Teucrium Wheat ETF (WEAT) Teucrium Corn ETF (CORN) Teucrium Soybean ETF (SOYB) Deere & Company (DE)
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 Trader2014-09-24 01:06:192014-09-24 01:06:19September 24, 2014
It now appears that the ?Alibaba? correction (BABA) is at hand.
I warned you, pleaded with you, and begged you about this yesterday, and on May 8 (click here for ?Will Alibaba Blow Up the Market?).
The longer the company postponed the mother of all IPO?s, the higher the prices flew, until we finally got a print at the absolute apex of the market. Now, it?s time to pay the piper.
The development is part of a broader move out of riskier, higher beta stocks into safe, large caps that has been underway for several weeks now. Those traders who are ahead want to protect their years. Those who aren?t are screwed anyway, so don?t bother returning their phone calls.
Look no further than my favorite, Tesla (TSLA), which topped out on September 3, along with the rest of the MoMo high technology, biotechnology and Internet names.
Still love the cars, though.
The (IWM) has really been sucking hind teat all year, falling by 3% year to date compared to an 8% gain in the S&P 500.
Yesterday, the sushi really hit the fan when the 50-day moving average pierced the 200-day moving average for the first time since August, 2011. Known as a much dreaded ?death cross,? this is the technical equivalent of slitting both wrists and thrashing about in shark-invested waters, heralding more declines to come.
Let me list the reasons why this is the sector traders love to hate when markets move from ?RISK ON? to ?RISK OFF?:
*Since small companies borrow more than large companies, they are far more sensitive to rising interest rates. Guess what? Rates have been rocketing this month.
*Since small companies are more leveraged (indebted) than big ones, they are more sensitive to a slowing economy.
*Small companies don?t have the international diversification of their bigger brethren, and therefore have less of a financial cushion to fall back on.
*The (IWM) has roughly 1.5 times the volatility of the S&P 500, making a short position here fantastic downside protection for a broader based portfolio of stocks. So you get a lot of selling here, as managers try to lock in performance for fiscal years that start ending as early as October 31.
*Did I mention that the stock market is at one of its most overbought levels in history, the worst since 1928? Bearish sentiment is at only 13%, the lowest since 1987. These are more reason to sell, as if you needed any.
My readers have made tons of money over the years playing the (IWM) on the short side. It?s time for another visit to the trough. I?m not finishing my year early.
Not yet, anyway.
If you can?t trade options, then buy the Short Russell 2000 Fund ETF (RWM) as a 1X play, or the Direxion Daily Small Cap Bear 3X ETF (TZA) for a 3X trade. However, 3X ETF?s of any kind are for intra day traders only.
Time to Bail on a Burning House
https://www.madhedgefundtrader.com/wp-content/uploads/2014/04/Burning-Building-e1430840521423.jpg308400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-09-24 01:05:532014-09-24 01:05:53Time to Bail on the Small Caps
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in San Francisco on Friday, October 24, 2014. An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets are available for $188.
As a special bonus this year, anyone who buys a ticket can bring a guest for free, provided that they are a trader or investor who may benefit from the services of the Mad Hedge Fund Trader. Just email Nancy at support@madhedgefundtrader.com with your guest?s name and email address so we know who is coming.
I?ll be arriving at 11:00 and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private club in downtown San Francisco near Union Square. Exact location will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my?online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/02/San-Francisco-e1410363065903.jpg238359Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-09-22 01:05:592014-09-22 01:05:59Friday, October 24 San Francisco Strategy Luncheon
If you want to delve into the case against the long-term future of US Treasury bonds in all their darkness, consider these arguments.
The US has not had a history of excessive debt since the Revolutionary War, except during WWII, when it briefly exceeded 100% of GDP.
That abruptly changed in 2001, when George W. Bush took office. In short order, the new president implemented massive tax cuts, provided expanded Medicare benefits for seniors, and launched two wars, causing budget deficits to explode at the fastest rate in history.
To accomplish this, strict ?pay as you go? rules enforced by the previous Clinton administration were scrapped. The net net was to double the national debt to $10.5 trillion in a mere eight years.
Another $6.5 trillion in Keynesian reflationary deficit spending by President Obama since then has taken matters from bad to worse. The Congressional Budget Office is now forecasting that, with the current spending trajectory and the 2010 tax compromise, total debt will reach $23 trillion by 2020, or some 130% of today?s GDP, 1.6 times the WWII peak.
By then, the Treasury will have to pay a staggering $5 trillion a year just to roll over maturing debt. What?s more, these figures greatly understate the severity of the problem.
They do not include another $9 trillion in debts guaranteed by the federal government, such as bonds issued by home mortgage providers, Fannie Mae and Freddie Mac. State and local governments owe another $3 trillion. Double interest rates, a certainty if wages finally start to rise and our debt service burden doubles as well.
It is unlikely that the warring parties in Congress will kiss and make up anytime soon, especially if we continue with a gridlocked congress after the November midterm elections. It is therefore likely that the capital markets will emerge as the sole source of any fiscal discipline, with the return of the ?bond vigilantes? to US shores after their prolonged sojourn in Europe. If you don?t believe me, just look at how bond owners have fared this week. Ouch!
Since foreign investors hold 50% of our debt, policy responses will not be dictated by the US, but by the Mandarins in Beijing and Tokyo. They could enforce a cut back in defense spending from the current annual $700 billion by simply refusing to buy anymore of our bonds.
The outcome will permanently lower standards of living for middle class Americans and reduce our influence on the global stage.
But don?t get mad about our national debt debacle, get even. Make a killing profiting from the coming collapse of the US Treasury market through buying the leveraged short Treasury bond ETF, the (TBT). Just pick your entry point carefully so you don?t get shaken out in a correction.
Looks Like I Can?t Afford the Next War
00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-09-19 01:03:462014-09-19 01:03:46The Structural Bear Case for Treasury Bonds
Like a deer frozen in a car?s onrushing headlights, markets have been comatose awaiting Federal Reserve governor Janet Yellen?s decision on monetary policy and interest rates.
Interest rates are unchanged. Quantitative easing gets cut by $15 billion next month, and then goes to zero. Most importantly the key ?considerable period? language stayed in the FOMC statements, meaning that interest rates are staying lower for longer.
Personally, I don?t think she?s raising interest rates until 2016. The number of dissenters increased from one to two, but then both of them (Fisher and Plosser) are lame ducks. And, oh yes, the composition of the 2015 Fed will be the most dovish in history.
The latest data points made this a no brainer, what with the August nonfarm payroll coming in at a weak 142,000, and this morning?s CPI plunging to a deflationary -0.20% for the first time since the crash.
Of course, you already knew all of this if you have been reading the Mad Hedge Fund Trader. You knew it three months ago, six months ago, and even a year ago, before Janet Yellen was appointed as America?s chief central banker. Such is the benefit of lunching with her for five years while she was president of the San Francisco Fed.
The markets reacted predictably, with the Euro (FXE), (EUO), and the yen (FXY), (YCS) hitting new multiyear lows, Treasury bonds (TLT), (TBT) breaking down, and precious metals (GLD), (SLV) taking it on the kisser.
What Janet did not do was give us an entry point for an equity Trade Alert (SPY), with the indexes close to unchanged on the day. The high frequency trader?s front ran the entire move yesterday.
Virtually all asset classes are now sitting at the end of extreme moves, up for the dollar (UUP) and stocks, and down for the euro, yen, gold, silver, the ags, bonds and oil. It?s not a good place to dabble.
Putting on a trade here is a coin toss. And when you?re up 30.36% on the year, you don?t do coin tosses. At this time of the year, protecting gains is more important than chasing marginal gains, which people probably won?t believe anyway.
If you want to understand my uncharacteristic cautiousness, take a look at the chart below sent by a hedge fund buddy of mine. It shows that investor credit at all time highs are pushing to nosebleed altitudes. Not good, not good. Oops! Did somebody just say ?Flash Crash??
This is not to say that I?m bearish, I?m just looking for a better entry point, especially as the Q????????? 3 quarter end looms. I?ve gotten spoiled this year. Maybe the Scottish election results, the Alibaba IPO, or the midterm congressional elections will give us one. Buying here at a new all time high doesn?t qualify.
It?s time to maintain your discipline.
Sorry, no more pearls of wisdom today. I?ve come down with the flu.
Apparently, this year?s flu shot doesn?t cover the virulent Portland, Oregon variety. Was it the designer coffee that did it, the vintage clothes, or those giant doughnuts dripping with sugar?
Back to the aspirin, the antibiotics, the vitamin ?C?, and a chant taught to me by a Cherokee medicine man.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/09/John-Thomas5-e1410989501597.jpg400266Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-09-18 01:04:402014-09-18 01:04:40She Speaks!
Global Market Comments September 17, 2014 Fiat Lux
Featured Trade: (THURSDAY OCTOBER 9 INCLINE VILLAGE, NEVADA STRATEGY LUNCHEON), (WHY I HAVE NO POSITIONS), (TLT), (TBT), (AAPL), (XLE), (XLV), ?(IBB), (BIDU), (FXE), (FXY), (YCS), (TAKING A BITE OUT OF STEALTH INFLATION), (SGG), (WEAT)
iShares 20+ Year Treasury Bond (TLT) ProShares UltraShort 20+ Year Treasury (TBT) Apple Inc. (AAPL) Energy Select Sector SPDR ETF (XLE) Health Care Select Sector SPDR ETF (XLV) iShares Nasdaq Biotechnology (IBB) Baidu, Inc. (BIDU) CurrencyShares Euro ETF (FXE) CurrencyShares Japanese Yen ETF (FXY) ProShares UltraShort Yen (YCS) iPath DJ-UBS Sugar SubTR ETN (SGG) Teucrium Wheat ETF (WEAT)
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 Trader2014-09-17 10:42:102014-09-17 10:42:10September 17, 2014
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