Global Market Comments
June 12, 2013
Fiat Lux
Featured Trade:
(JULY 8 LONDON STRATEGY LUNCHEON),
(TESLA GETS AGGRESSIVE ON MARKETING),
?(TSLA), (GM), (F),
(WATCH OUT FOR THE CHIHUAHUA GLUT)
Tesla Motors, Inc. (TSLA)
General Motors Company (GM)
Ford Motor Co. (F)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in London on Monday, July 8, 2013. A three-course lunch will be followed by a PowerPoint presentation 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. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $229.
I?ll be arriving an hour early 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 on St. James Street, the details of which will be emailed to you 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.
Tesla (TSLA) CEO, Elon Musk, has taken off the gloves and is offering an innovative new hybrid lease that promises to bring in thousands of new buyers of his revolutionary, all electric S-1 sedan.
The package eliminates the downside risk that concerned prospective customers about the resale value of their cars down the road. Under the program, Tesla will buy back your car at 50% of the purchase price after 36-39 months. This equates to a rate of depreciation that is on par with other premium, high-end vehicles, like Mercedes, Porsche, and Jaguar.
Assuming that you buy the 85 kWh, 270 miles range S-1 for $79,900, this works out to a monthly payment of $1,025, also in line with the market. Tesla people tell me that since the plan was announced, 90% of the buyers have opted for the lease option. Many are actual cash buyers who are placing the maximum $50,000 down with the intention to pay off the $30,000 balance in six months, just to get the free put option on the vehicle.
Tesla is also moving full steam ahead with its national supercharger network, which will enable electric car owners to drive coast to coast. Only 45 minutes is required to obtain a full charge. Just last night, my S-1 upgraded itself online and I was presented with new superchargers in Gilroy and Bakersfield, California. I can now make it down to San Diego.
Elon has promised to take his family on such an expedition as soon as the infrastructure is in place some time next year. I am considering my own trip from San Francisco to Chicago, which according to MapQuest, I could do in 30 hours. After all, it will be free, less the investment of my own time at the wheel, and the wear and tear on the tires.
When I was a teenager during the 1960?s, I hitchhiked from the West to the East coast more than 30 times. I used to race my younger brother from Los Angeles to New York, who finally won with a record time of 49 hours. I met a lot of strange people in those days. Once, I was picked up in Texas by a nervous, chain-smoking woman driving a souped up Dodge Dart fleeing a violent husband, seeking refuge in California. She drove like a bat out of hell the entire way, and we made the Golden State in record time. It?s funny, the things you remember.
A drive across the Great American Desert can have a cleansing, almost rejuvenating effect, as long as you don?t mind the country western music on the radio. The last time I did this was during the eighties, when I drove my ?sister to graduate school at Texas A&M. That little foray found me line dancing with a bunch of drunken Aggies in a College Station bar. How is it that everything surreal that happens to me always occurs in Texas?
But I digress. Tesla has quit making the 40 kWh, 130-mile range version of the S-1, as virtually all demand was for the long range model. The waiting list is now down to two months, which is why they took the next step on the marketing front. The four-wheel drive Model X is still on schedule for 2014, and I am number 645 on the waiting list for that vehicle. I have already wired my Lake Take house for 220 volt recharging. Who cares what the price is!
When I stop at traffic lights in the city, I still get applause and thumbs up from cheering groups of pedestrians. And then there are those little notes tucked under the windshield wipers from admiring young women asking for rides. That, alone, is worth the $100k. The State of California has already sent me my $2,500 Clean Vehicle Rebate, and I plan to claim my $7,500 Qualified Plug-in Electric Drive Motor Vehicle Credit (form 8936) on my federal tax return this year.
I have received a lot of emails about the weekend Barron?s article panning Tesla. Elon says he can drop the cost of his batteries from $400 to $200 in five years, making his planned mass market $40,000, 200 mile range ?Gen III? Tesla profitable. General Motors (GM) says he can?t. Given the recent track record of the two companies, I am more inclined to back Elon.
Let me tell you what is really going on here. The automobile establishment absolutely hates Tesla, because Musk has proven everything they said was impossible. Tesla doesn?t advertise, as its innovative, low cost business model sells all of its cars online. This is why they are banned in Texas, which hasn?t the slightest interest in seeing non-oil forms of transportation succeed.
Tesla also doesn?t advertise. Open the pages of Barron?s, and you will find ads extolling the virtues of General Motors, Ford, (F), and Chrysler, but not one from the disruptive Tesla. It?s the same with the financial industry. Barron?s often publishes damning expos?s on tiny companies you have never heard of, but extolls the great wisdom and foresight of PIMCO, Fidelity, and Morgan Stanley, their largest advertisers. That is the free market, capitalist world we live in.
Gen III Tesla
Made in America
You never know what the third, fourth, or fifth derivative impacts a major economic trend can cause. That is how the collapse of the housing market has created a Chihuahua glut in California, where evicted homeowners are handing over their pets to animal shelters.
The diminutive Mexican canine enjoyed a boom in popularity in recent years, thanks to movies like Beverly Hills Chihuahua and Legally Blonde. Celebrities, like Paris Hilton, have also helped promote the breed, flaunting one in front of the paparazzi. Animal shelters in the Land of Fruits and Nuts have been so overwhelmed they have had to ship the ultra-cute, but utterly useless animals to pounds as far away as Toronto.
Will the unintended consequences of Greenspan?s low interest policy never end? Give the poor Chihuahuas a break! We can count on future dislocations to release more Chihuahuas on the market, as well as other exotic pets. How do you think all those alligators got into the New York sewer system and pythons in the Chicago subway?
Global Market Comments
June 11, 2013
Fiat Lux
Featured Trade:
(JULY 2 NEW YORK STRATEGY LUNCHEON),
(MY BIG MISS IN SWITZERLAND), (FXF), (EWL),
(TESTIMONIAL)
CurrencyShares Swiss Franc Trust (FXF)
iShares MSCI Switzerland Capped Index (EWL)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Seminar, which I will be conducting in New York, NY on Tuesday, July 2, 2013. An excellent three-course lunch will be provided. A PowerPoint presentation will be followed by an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $209.
The formal luncheon will run from 12:00 to 2:00 PM. I?ll be arriving an hour early 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 event will be held at a prestigious private club on Central Park South, the details of which will be emailed to you 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.
I have got a lot right in the markets lately, especially this year, when 90% of my Trade Alerts went well. But as they say in karate school in Japan, you can?t block all the punches. I certainly missed the opportunity of a lifetime to load up on the stocks of a certain country, which I am about to visit. I?ll give you a hint up front: think edelweiss.
Yes, you guessed it. The Swiss economy has been barely eked out any positive GDP growth ever since Europe began its meltdown a few years ago. Q1, 2013 saw a gain of 0.6%, bringing the year on year figure to a lackluster 1.1%.
While broad swaths of the economy are weak, chemicals, pharmaceuticals, precision instruments, watches and jewelry, the things the Swiss are best at, seem to be holding their own. But it makes America?s 2.5% rate look positively robust by comparison.
Switzerland is certainly a country with many attractions. It is home to world-class companies, like, Nestle, Roche, Novartis, and Swatch. It has perennially run a strong current account surplus. Its 347 banks control assets amounting to seven times the country?s GDP, and account for 40% of stock market capitalization (compared to 10% in the US).
Despite shunning membership in the European Community, it has developed a first class export industry. It is not all about watches, cheese, cowbells, and Swiss army knives.
None of this explains why the Swiss franc has been so weak. Since the August, 2011 peak, the Swiss Franc has plunged by a gut churning 28%, and has been one of the world?s weakest currencies against the greenback. Note that the ETF (FXF) is priced in the inverse to the cash market, meaning that it takes $1.05 to buy one Swiss franc. To give you some long-term perspective on this, the dollar is now 72% cheaper than when I first visited this alpine paradise 43 years ago, when it cost SF3.00 to purchase a buck.
As strong as the fundamentals are for Switzerland, they have nothing to do with the strength of the currency. It has long been the flight to safety currency of choice for Europeans. While a director of Swiss Bank Corporation, I personally saw gold bars imprinted with the German eagle secreted there by high-ranking Nazi?s and never reclaimed. This is one theory why the Germans didn?t invade Switzerland during WWII.
Later, asset-protecting investors believed that the Swiss Army?s formidable mountain redoubts could hold the Soviet army at bay. To this day, there are still formidable stockpiles of weapons in the basements of the big Swiss banks, and most of the senior staff double as army officers.
One reason the Swiss franc has been a speculative target is that the country has a Lilliputian GDP of $635 billion, only 4.1% of America?s.
In 2011, the country faced a major currency crisis, as fears of a dollar and euro collapse drove the Swiss franc to an unbelievable all time high of 70 centimes to the dollar. While I was there during the summer, the local newspapers were chock full of stories about factory closings and mass layoffs. The strong Swiss franc was rapidly driving the economy out of business. Much business decamped for Germany, where the cost of production was denominated in far cheaper euros.
In September, 2011 the Swiss National Bank took drastic action. It immediately devalued the Swiss franc against the euro by 10%, and then pegged it there, vowing to spend whatever it takes to maintain the cheaper rate. It took on all comers.
The bold strategy was a huge success, as you can see from the charts below. Some friends at the central bank tipped me off that action was imminent, enabling me to get my readers into the most successful Trade Alert since the inception of this service. Over the course of a weekend, they made close to 400% on Swiss franc puts.
Here comes my big miss. I didn?t execute the second half of the trade. Basic Macro Hedge Trading 101 tells us that weak currencies are always great for local stock markets. That was definitely the case in Switzerland, where the equity ETF (EWL) has since posted an eye popping 55% return. That makes it one of the top performing European bourses, despite its feeble economy.
Did I do the trade? Nope? Perhaps one 4X gain in Switzerland was enough?
As penance for my oversight, I shall be punished severely. When I visit Switzerland in a few weeks for a fresh round of high altitude climbing, the mountains will no doubt claim their share of blisters, cuts, and rope burns. A hangover or two as well may enter the picture, as well. Those guides drink like fish.
At least the fondue, r?sti potatoes, raclette, and schnapps will be cheaper.
Global Market Comments
June 10, 2013
Fiat Lux
Featured Trade:
(UPDATED 2013 SUMMER STRATEGY LUNCHEON SCHEDULE),
(LEARNING IN THE SCHOOL OF HARD KNOCKS),
(FXY), (YCS), (DXJ),
(THE NEW DEFLATION DEFINITION),
(THE WORLD IN 100 YEARS)
CurrencyShares Japanese Yen Trust (FXY)
ProShares UltraShort Yen (YCS)
WisdomTree Japan Hedged Equity (DXJ)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Updates, which I will be conducting throughout Europe during the summer of 2013. A three-course lunch will be followed by a PowerPoint presentation 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. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week.
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 at http://madhedgefundradio.com/ and click on ?LUNCHEONS?, and the city of your choice.
New York City - July 2
London, England - July 8
Amsterdam, Netherlands - July 12
Berlin, Germany - July 16
Frankfurt, Germany - July 19
Portofino, Italy - July 25
Mykonos, Greece - August 1
Zermatt, Switzerland - August 9
It seems that all you hear about these days is deflation. That is certainly what the bond market is telling us, with my screen blaring at me a miserable 2.10% yield for the ten year Treasury bond.
But there is a new definition for this economic malady that applies to us hapless consumers. In the newest variety, the value of our income falls, while the prices of things we need to buy are going through the roof. It is a particularly pernicious form of deflation, as it is burning our candles at both ends at the same time.
Take a look at the chart below, showing the cost of college tuition versus the consumer price index and home prices. This hits home particularly hard, as I have just put three kids through college, and am reduced to riffling through the sofa cushions looking for spare change in order to meet the bills. When I graduated from the University of California in the seventies the tuition was $3,000 a year. Today it is $15,000, and climbing at a 30% annual rate.
The saddest part of the story is that rampant wage deflation means that recent graduates have a grim choice between taking a poorly paid job, or no job at all. That leaves them woefully unable to repay the student loans they ran up to obtain their rapidly devaluing diplomas. Stories of undergraduate debt loads of $100,000 or more are not uncommon.
And if you were planning on becoming a teacher, forget it, unless you want to move to Saudi Arabia, Russia, or South Korea. After watching tens of millions of jobs get shipped to China over the last decade, did you expect anything less? Just ad this problem to the ever-lengthening list of ways we are getting screwed.
