Global Market Comments
November 10, 2016
Fiat Lux

Special New World Order Issue
and All Asset Class Review

Featured Trade:
(CAT), (X), (BAC), (XOM), (XLV), (FCX),
(AAPL), (QCOM), (AMZN), (EEM), (EWW), (T), (SPG), (FSLR), (SCTY), (GLD), (TLT), (TBT)

Caterpillar Inc. (CAT)
United States Steel Corp. (X)
Bank of America Corporation (BAC)
Exxon Mobil Corporation (XOM)
Health Care Select Sector SPDR ETF (XLV)
Freeport-McMoRan Inc. (FCX)
Apple Inc. (AAPL)
QUALCOMM Incorporated (QCOM)
Amazon.com, Inc. (AMZN)
iShares MSCI Emerging Markets (EEM)
iShares MSCI Mexico Capped (EWW)
AT&T, Inc. (T)
Simon Property Group Inc. (SPG)
First Solar, Inc. (FSLR)
SolarCity Corporation (SCTY)
SPDR Gold Shares (GLD)
iShares 20+ Year Treasury Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)

Talk about a game changer, a disruption of the status quo of the first order.

With the election of Donald Trump as president of the United States, and the retaining of the House of Representatives and the Senate by the Republican Party, we are looking at nothing less than a new world order.

After staying awake for the past 48 hours, speaking to seasoned money managers, strategists, and even senior economic advisors to the new president, I think I have a sense of the immediate trading opportunities that have been placed before us, as well as the long-term impacts.

What we are looking at are permutations of permutations of permutations.

Call it a trader?s dream come true, and it is heralding the greatest sector rotation of all time.

Donald Trump?s campaign was so far off the grid that it couldn?t be measured by traditional tools used by Democrats, Republicans, or even Trump himself.

There is no way Google (GOOG) was going to be able to effectively analyze a demographic that doesn?t know how to use a computer or use electricity. And no one was more surprised than Trump.

While Hillary Clinton won the popular vote, a highly vocal minority turned out to be large enough to win 278 Electoral Votes, sufficient for a Trump win.

All it took was a swing of 60,000 votes that came out of nowhere in rural Pennsylvania. The butterfly flaps its wings.

We trade the market we have, not the one we want. So let's get on with the important business of making money.

We got the 1,000 point sell off I predicted for the Dow Average. Who knew we would make a round trip? in hours.

Did you like the effect Ben Bernanke?s quantitative easing (QE) 1,2,3, and 4 had on your asset prices? Donald Trump just handed you QE 5 in the form of his proposed $1 trillion infrastructure budget.

Dumping this amount of cash on the economy will raise GDP growth for the short term, but also invite an earlier return of inflation and higher interest rates.

For years, analysts searched the horizon for causes of the next recession and found none. Now we have an obvious one, a US growth spurt that sparks inflation and leads to another Fed induced series of interest rate spikes. This could be a 3-4 year time horizon.

The bond markets are telling us as much, with ten year Treasury bond yields (TNX) rocketing an eye popping 17 basis points today, smashing through 2.02%.

What this brings us is a higher high in stock prices, followed by another crash a few years down the road. This is simply the boom and bust cycle that has been a hallmark of capitalism since time immemorial.

I?ll start with a clear list of winners and losers from a Trump administration.

WINNERS

Banks
Health Care
Big Oil
US Dollar
Infrastructure
Commodities
Gold
Domestic Businesses
The Wealthy
Russian Ruble
The Midwest Rust Belt States

LOSERS

Alternative Energy
Solar
Gun makers
Bonds
Utilities
REITS
Emerging Markets
Technology
Large Multinationals
The Poor
The Euro and Yen
The Mexican Peso
The Coasts

Here is the interesting thing for stock traders:

The sectors benefiting from the New Order have been in long-term secular bear markets. The losers have been in bull markets and are just coming off of all time highs.

So there are a series of sector rotations going on here which, if you get them right, could deliver out performance for years to come.

Let me spell it out for you. Buy domestic plays like commodities (FCX), infrastructure, construction (CAT), steel (X), banks (BAC), energy (XOM), and health care (XLV).

Sell international plays such as technology (AAPL), semiconductors (QCOM), large multinationals (AMZN), emerging markets (EEM) (EWW), yield plays, utilities, telecommunications (T), REITs (SPG), solar (FSLR), and other alternative energy stocks (SCTY).

I?ll make a few quick comments on each asset class.

Banks will benefit from steeply rising interest rates, the repeal of Dodd-Frank, and the end of the Volker Rule limiting risk taking. So the starting gun has been fired for the next financial crisis years off.

Health care will prosper from the end of Obama Care and the freedom to raise prices at will. Narrow monopolies will persist, and price gouging will grow.

The energy industry will face a double-edged sword. Big oil will love the rollback of environmental regulation.

On the other hand, a trade war with China will slow growth there, the world?s largest new consumer of energy, keeping oil prices lower for longer.

With a big infrastructure spend on the way, commodities, steel, and construction are all obvious plays.

Big tax cuts will favor companies with large domestic businesses and income, but not so much for those with large international trade.

Of course, the big winners are the One Percent, who will see their fabulous tax breaks preserved, if not expanded, especially the golden ?net operating loss carry forward? that Trump has mined so successfully.

Concerning the losers, now that the denial of global warming is official government policy, you can pretty much kiss solar energy goodbye.

The various tax incentives for investment there will soon be a distant memory. Notice that Tesla (TSLA) shares were down $10 today during a massively strong market.

Tougher trade deals and the tearing up of international treaties come at the expense of every emerging stock market.

Bonds are now in a 20-year bear market, but then we already knew that. That?s why I have been selling every rally in the Treasury bond market (TLT) for the past three months.

What?s on the table now is a prolonged move that could take yields up to 6% in coming years.

Adding a turbocharger will be the $10 trillion in new government debt Trump?s combination of tax cuts and spending hikes will bring. Remember, Trump is a "debt guy" big time.

Throw in a new war with Iran, or anyone else, and you can double that figure, taking our total national debt up to $40 trillion. Recall that Trump said on many occasions that ?We?ll bomb the s? out of them.? We?ll find out how real that sentiment is.

Oh, and an abrogation of the Iran nuclear deal gives them an operational weapon within a year. Stick that in your pipe and smoke it. Hope you don?t have any draft age sons.

Gold (GLD) will sniff out the coming inflation sooner rather than later, and resume its new bull trend. Did you notice the $50 knee jerk move last night? That?s what that was all about.

Of course, the US dollar will love all this, as it will become the preeminent high-yielding currency for the next several years. Woe to the Euro (FXE), the Japanese yen (FXY), and the Australian dollar (FXA).

Fortunately, I saw this one coming, and went into the election short the euro, which provided a nice hedge for my equity plays.

Real estate, both residential (LEN) and commercial, will have a spurt in the short term, as buyers rush to beat rising home mortgage rates.

However, we know that this always ends in a bubble and a crash, probably within three years.

It?s that capitalism thing again.

I was looking forward to a quiet and easy retirement in the years ahead. It looks like that is just not in the cards for me.
bac fcx fxe eww trump-finger-wagging-acceptance-speech

Here?s the New World Order

?Pollsters are zero for two this year. They should find new jobs.? said investor Nelson Peltz.

l-is-for-loser

Global Market Comments
November 9, 2016
Fiat Lux

Featured Trade:
(NOVEMBER 18TH LAS VEGAS, NV GLOBAL STRATEGY LUNCHEON)
(THE WAR IS OVER)
(WHY FRACKING WILL MAKE YOUR 2017 PERFORMANCE),
(USO), (DIG), (UNG), (XOM), (OXY),
?(DVN), (APC), (COG)

United States Oil (USO)
ProShares Ultra Oil & Gas (DIG)
United States Natural Gas (UNG)
Exxon Mobil Corporation (XOM)
Occidental Petroleum Corporation (OXY)
Devon Energy Corporation (DVN)
Anadarko Petroleum Corporation (APC)
Cabot Oil & Gas Corporation (COG)

Ulysses S. Grant was a man only America could produce.

A shy boy who was exceptionally good with math and horses, his father gained him entry to the US Military Academy at West Point without even telling him. Not an outstanding student, he graduated in the lower half of his class.

During the Mexican War of 1846, he was disappointed when put in charge of the Quartermaster Corps. He later become an alcoholic when sent to a distant post in Northern California, and left the Army in disgrace in 1854.

A series of disappointments followed in real estate speculation, farming, and debt collection. He ended up working as a clerk in his father?s leather goods shop in Galena, Illinois when the Civil War broke out in 1861.

Suddenly, his logistical skills were greatly valued by an army that was ramping up in size from tens to hundreds of thousands.

He was quickly promoted to brigadier general and went on to win a series of victories unprecedented in American history: Fort Donaldson, Shiloh, Vicksburg (where my ancestor served), Atlanta, the Wilderness, and Richmond.

His recurring strategy would be very familiar to any US Marine today: attack, attack, attack! He is viewed by many as the greatest general of the 19th century.

When Robert E. Lee surrendered the Confederate army in 1865 at Appomattox Court House, there was enormous political pressure from the North for Grant to enforce harsh and vindictive peace terms.

The Confederate Army was starving, so he immediately gave them 450,000 rations, which, as a logistics expert, he just so happened to have on hand.

He permitted the rebel army to keep one rifle per seven men to protect themselves from roving brigands.

Grant made the full resources of the US Navy available to the defeated army?s men to get them home. Many of the exhausted soldiers had traveled over 1,000 miles to fight in Northern Virginia.

He knew that the men would be returning to cities and farms that had been ravaged by the war. He did what he could to help them restart their lives.

Finally, General Lee was permitted to keep his sword, an important symbolic gesture. Historians believe that Grant?s generous terms substantially shortened the war and saved 100,000 lives.

Grant?s rationale for the soft terms was simple: ?We are all Americans now.?

Grant went on to become US president for 8 years, from 1868-76.

His work was considered vital in reuniting a sharply divided country.

His memoir, completed a week before he died, and published by Mark Twain, became the biggest seller in history up to that time.

At his 1885 funeral, his coffin was fittingly carried by three Union and three Confederate generals.

America has just undergone perhaps the most serious internal divide since the Civil War. One side may be ebullient and celebratory, while the other is disappointed, bitter, and disillusioned.

I think it is time for all of us to move on and apply ourselves to the important business of making America the great shining city on the hill.

That?s how the rest of the world sees us.

We should too.

We are all Americans now.

Now for that Trade Alert.

ulysses-s-grant
50-us-bill

Global Market Comments
November 8, 2016
Fiat Lux

Featured Trade:
(NOVEMBER 9TH LIVE GLOBAL STRATEGY WEBINAR),
(THE FIRST PRESIDENTIAL ELECTION),
(MAD DAY TRADER TESTIMONIAL)

I was sitting in front of the fire reading research at my waterfront estate at Lake Tahoe when the phone rang.

The Secret Service was calling from Reno, Nevada asking if I wouldn?t mind guiding someone on a hike in the High Sierras.

?Who, pray tell, was coming?? I asked.

?Sorry, need to know? was the predictable reply. I would find out when the event came off.

The next morning six black GM Suburbans with tinted windows drove through my front gate.

A minute later, I was introduced to Annie Kaine, wife of Tim Kaine, the vice presidential candidate with Hillary Clinton.

Annie is a native of Virginia and a Harvard Law grad, who put in time as a civil rights worker, and later as a judge in her home state. She was the First Lady of Virginia from 2006-2010.

Annie had never visited the Sierras before, but had long known of their beauty. While her husband was campaigning in nearby Reno, she took the day off to check off an item on her bucket list.

I guided Annie up the Incline Village Flume Trail, one of my favorites, to the Tahoe Rim Trail at 8,500 feet. We paused to stop at the place where Mark Twain first caught sight of the crystal clear lake.

A half dozen Secret Service agents, in their thirties and in incredible shape, followed at a respectful 50- foot distance, periodically providing radio updates to an unknown supervisor.

No pictures were allowed.

I related the local history and mentioned that my ancestors had ties to Virginia?s Tidewater area before they moved on the Kentucky, Missouri, and ultimately, California.

Then I launched into a long discussion of presidential politics, not the current race, but the first one.

I remember the first presidential election like it was yesterday.

Back in 1788, George Washington was so popular that he ran unopposed. Then the battle was for the vice presidency which was elected separately.

Our current electoral system did not come into place until the passage of the 12th amendment in 1802.

John Adams won handily, a flinty attorney from Massachusetts, edging out John Hancock and John Jay.

Adams helped write the Declaration of Independence and the Constitution, obtained crucial loans from the Dutch during the Revolutionary War and negotiated the peace treaty with Britain.

Adams favored a strong central government. He went on to be elected the second president in 1797.

Political parties did not yet exist, nor did opinion polls or focus groups. ?Candidates were either Federalists or anti Federalists, being for or against the constitution. The Federalists won with a 90.5% margin.

There was no single election day. Instead, voting stretched over a month, from December 15 to January 10.

This was so voters could walk or ride a horse long distances to get to the polls. Since government was new, there were few roads or bridges to cross rain-swollen streams and rivers.

The weather on the east coast is often frigid and snowy that time of the year. Candidates would greet voters with a side of beef roasting on an open spit and a cup of spiced rum. Drunkenness at the polls was a common problem.

Only white men of property could vote, limiting the turnout to only 1.3% of the country?s 3 million population.

Virginia was the political powerhouse of the day, with 12 of 95 votes in the Electoral College. The state then was much larger, and included the lands that later became West Virginia and Kentucky.

Virginia?s political impact was further increased because it was given additional seats in the House of Representatives equivalent to three fifths of its substantial slave population. This practice continued until the Civil War.

Only ten of 13 states voted because New York, North Carolina, and Pennsylvania had not yet ratified the constitution. Only six states allowed any popular voting at all, relying on their electors to make the choice.

A lot has changed since the first presidential election 228 years ago.

Since then, the numbers of eligible voters has steadily expanded.

African American men won the right to vote with the passage of the 15th Amendment in 1870, but they didn?t get full voter?s rights until the Voting Rights Act became law in 1965.

Women achieved the right to vote with the 19th Amendment in 1920. The voting age was lowered to include 18 year olds with the 26th Amendment in 1971 (that one I really DO remember, and I voted in 1972).

I?m keeping the letter short today so everyone has plenty of time to get out there and vote. So get out there and do it. It?s a privilege and a right, so use it.

I told Annie Kaine to come back any time she wanted, and next time, bring her husband and her skis. She said she would love to, as long as I didn?t mind a larger Secret Service detail.

I replied that I didn?t mind at all.

lake-tahoe-schematic
lake-tahoe-view the-colonies george-washington

Vote for Me

I have benefited greatly from your whole approach to chart analysis, including extreme bands, trend analysis 253/200, William's 30, OB/OS, levels, ADX, CMF, down to up, just to name the most important ones for me.

For almost a year I focused on day trading the levels in the (SPX) and some other symbols.? My results were mixed with losers tending to out weigh winners. ?

Consequently I have been focusing on figuring out option strategies, which take more consistent advantage of the chart analysis tools that you have provided me.

I am now having more success, but still have a long way to go.

Right now, I have a short in (MCD) and (TSLA) expiring on November 18, based on what I interpret from the tools that you have introduced me to.? We will see how they fare.

Anyway, I just want to say that I gain a lot from your training.?

Thanks so much and keep up the good work.

Rene Y

?Most people my age spend their week planning their haircut.? said Oracle of Omaha, Warren Buffet, on why he won?t retire.

post-cover-of-boy-getting-a-haircut

Global Market Comments
November 7, 2016
Fiat Lux

Featured Trade:
(MARKET OUTLOOK FOR THE WEEK OF NOVEMBER 7TH),
(XIV), (VIX), (VXX),
(EUROPEAN STYLE HOMELAND SECURITY),
(TESTIMONIAL)

VelocityShares Daily Inverse VIX ST ETN (XIV)
VOLATILITY S&P 500 (^VIX)
iPath S&P 500 VIX ST Futures ETN (VXX)