I am sitting here at the Lone Eagle Grill in Incline Village, Nevada, enjoying a rare solo lunch. No one is asking me about the future of interest rates, if there is any gold inside Fort Knox or if the aliens really landed at Roswell, New Mexico.
My table overlooks majestic Lake Tahoe, and a brace of mallard ducks has just skidded across the smooth surface for a landing.
My big score last night was coming across a wild bobcat, the first I had ever seen in the Sierras. After cautiously studying me for a minute with his bright yellow glowing eyes, he scampered up the mountain.
My pastrami sandwich is cooked to perfection, and would give Manhattan?s best culinary effort a run for its money. In fact, I have enough food here for two entire meals. Bring on the doggie bag!
After surviving a meat grinder of a January, putting the pedal to the metal in February, and dodging the raindrops of March, the model-trading portfolio of the Mad Hedge Fund Trader has posted a year-to-date gain of 10%.
We have generated profits for followers every month this year, and are now a mere 4.75% short of a new all time performance high.
Mad Day Trader, Jim Parker, and myself have performed like tag team wrestlers, delivering winners for our paid subscribers one right after the other. Some 12 out of my last 14 Trade Alerts have been profitable.
I managed to nail the collapse in the euro (FXE), (EUO) big time, backing that up with profitable long positions in the S&P 500 (SPY), the Russell 2000, and Gilead Sciences (GILD).
When the markets turned jittery, I coined it with short positions in Alcoa (AA), QUALCOM (QCOM) and AT&T (T).
Only a premature long in oil (LINE) and a short in Treasuries (TBT) have scarred my numbers so far this year.
Jim has been on an absolute hot streak in 2015, shaking the Bull Run in biotechs for all it is worth (ZIOP), (THRX), (ZTS) and executing some perfectly times shorts in oil (USO).
This is compared to the miserable performance of the Dow Average, which is up a pitiful +2% during the same period.
The nearly four and a half year return of my Trade Alert service is now at an amazing 162.4%, compared to a far more modest increase for the Dow Average during the same period of only 51%.
That brings my averaged annualized return up to 38.2%. Not bad in this zero interest rate world. It appears better to take on some risk and reach for capital gains and trading profits, than surrender to the paltry fixed income yields out there.
This has been the profit since my groundbreaking trade mentoring service was first launched in 2010. Thousands of followers now earn a full time living solely from my Trade Alerts, a development of which I am immensely proud.
What saved my bacon this month was my instant and accurate decoding of Fed chairman Janet Yellen?s cryptic comments on the future of possible interest rate hikes, or the lack thereof.
We got to eat our ?patience? and have it too.
Wall Street gets so greedy, and takes out so much money for itself, there is now nothing left for the individual investor any more. They literally kill the goose that lays the golden egg.
The Mad Hedge Fund Trader seeks to address this imbalance and level the playing field for the average Joe. Looking at the testimonials that come in every day, I?d say we?ve accomplished that goal.
It has all been a vindication of the trading and investment strategy that I have been preaching to followers for the past seven years.
Quite a few followers were able to move fast enough to cash in on my trading recommendations. To read the plaudits yourself, please go to my testimonials page by clicking here.
Watch this space, because the crack team at Mad Hedge Fund Trader has more new products and services cooking in the oven. You?ll hear about them as soon as they are out of beta testing.
Our business is booming, so I am plowing profits back in to enhance our added value for you.
The coming year promises to deliver a harvest of new trading opportunities. The big driver will be a global synchronized recovery that promises to drive markets into the stratosphere by the end of 2015.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011, 14.87% in 2012, and 67.45% in 2013, and 30.3% in 2014.
Our flagship product,?Mad Hedge Fund Trader PRO, costs $4,500 a year. It includes?Global Trading Dispatch(my trade alert service and daily newsletter). You get a real-time trading portfolio, an enormous research database and live biweekly strategy webinars. You also get Jim Parker?s?Mad Day Trader?service and?The Opening Bell with Jim Parker.
To subscribe, please go to my website, ?www.madhedgefundtrader.com, click on the ?Memberships? located on the second row of tabs.
By the way, those of you who ran up huge profits with your euro shorts in January and February, and the overnight killing I scored with the Russell 2000 (IWM) this week, you all owe me new testimonials.
Ship em in!
Oh, and buy the way, there is no gold in Fort Knox. That is why Nixon took us off the gold standard in 1973. And the aliens did land at Roswell. Where do you think my iPhone and Tesla came from?
Looking for the Next Great Trade
Global Market Comments
March 20, 2015
Fiat Lux
SPECIAL JAPAN ISSUE
Featured Trade:
(FRIDAY, MAY 15 SAN FRANCISCO STRATEGY LUNCHEON)
(THE BULL CASE FOR JAPANESE STOCKS),
(DXJ), (SNE), (CAJ),
(IT?S ALL OVER FOR THE JAPANESE YEN),
(FXY), (YCS)
WisdomTree Japan Hedged Equity ETF (DXJ)
Sony Corporation (SNE)
Canon Inc. (CAJ)
CurrencyShares Japanese Yen ETF (FXY)
ProShares UltraShort Yen (YCS)
If you live long enough, you see everything.
After a 25-year hiatus, here I am finally back making money in the Japanese stock market once again.
Any sentient being couldn?t help but notice the specular results the Japanese stock market has produced so far in 2015.
The Nikkei Average is up a robust 11.7%, while the Wisdom Tree Japan Hedged Equity Fund (DXJ), which eliminates all of the underlying yen currency risk, has tacked on an impressive 13.2%. This compares to a US Dow average return for the same period of essentially zero.
So, is it too late to get in? Are we joining the tag ends of a party that is winding down? Or is the bull market just getting started?
To answer that question, you have to go to a 30 year chart for the Nikkei average which chronicles all of the violence, heartbreak and drama of the great Japanese stock market crash, and the budding recovery that has since ensued.
The bulls see a crucial triple bottom at ?7,500 that has spread out over ten years, from 2003 to 2013. The initial resistance for the bull market was at ?18,000. That level was decisively broken last week.
And as any long in the tooth technical analyst will tell you, the longer the base building, the longer the recovery.
It is no accident that this sea changing technical action is happening now. Last year rumors abounded that the Japanese government would mandate higher equity weighting by Japanese pension fund managers.
That is exactly what happened at the end of February. The government required pension fund managers to increase equity weightings from 8% to 25%, at the expense of their Japanese government bond holdings. I guess the 0.33% yield on the ten-year wasn?t exactly tickling their fancy.
To meet the new guidelines, managers have to buy $120 billion worth of stocks over the next two years.
That is a lot of stock.
Japanese pension fund managers are the world?s most conservative. Since they can no longer buy all the domestic bonds they want, they are investing in stocks that are essentially bond equivalents.
These include relatively high dividend yielding domestic defensive sectors, like pharmaceuticals, railroads, services, chemicals and foods. With the program only just starting, the Nikkei will be underpinned by local Japanese institutional buying, possibly for years. That eliminates your downside.
Enter the foreign investor. Gaijin mutual fund and hedge fund managers alike were net sellers of Japanese stock for all of 2014. They turned to net buyers only three weeks ago.
Guess what kind of stocks foreigners like to buy? The same kind they buy at home: technology stocks. Take a look at the charts below for Sony (SNE) and Canon (CAJ) and the breakouts there exactly match up with the timeline I described above.
Sony, in particular deserves special mention. Sony was the Apple of Japan during the 1980?s, and should have been the Apple of today. But the company lost its way after 1990, when the founder, my friend Akio Morita, passed away.
Succeeding management was dull, sluggish, and unimaginative. The world quit buying its top of the line stereo systems. As a result, its market capitalization plunged from $150 billion to only $10 billion.
The final indignity came when North Korean hackers almost wiped out the company last year when it released The Interview, a spoof on dictator Kim Jong-un.
These days, Sony is leading the resurgence of the Japanese stock market. Management modernized and westernized. It launched a range of new high tech products. It is selling at a dirt cheap 12X multiple. I also think it is safe to say that their hacking defenses are now state of the art.
It doesn?t hurt that when foreign investors think of buying Japan, picking up Sony is the first thing that comes to mind.
So the technicals and the supply/demand picture lines up, how about the fundamentals?
Go into Japan now, and you are betting that Prime Minister Shinzo Abe (I knew his dad), will succeed in his ?three arrows? plan for economic and financial reform. Insiders believe he can pull this off.
The December election gave him a continued mandate from the Japanese people. The Bank of Japan is also in his corner, implementing a monetary policy that is so aggressive that it was once thought unimaginable. Doubling the money supply in two years?
This is why the Japanese yen will continue to depreciate, which is also highly reflationary for the economy, and is the subject of my Trade Alert below to sell yen.
If all of this lines up, then the next target for the Nikkei is for it to add another ?10,000, up nearly 50% from here. Beyond that, the Japanese stock average is likely to take a run at its old 1989 high of ?39,000.
I remember the day it hit that level all too well.
The rock group Chicago was leading the charts with Look Away. The office at Morgan Stanley was packed with women wearing these big shoulder pads that made them look like football players. Huge sunglasses, neon colors and big hair were everywhere.
Like I said, if you live long enough, you see everything, even another Japanese bull market.
The only reservation I have about doing this trade right now is that the Japanese fiscal year ends on March 31. As we all know, book closings can generate some pretty weird gyrations in the market place as both companies and government window dress in the extreme.
However, once we are in the new fiscal year, I expect the yen to resume its downtrend, and the Nikkei its uptrend.
I think that the action in the foreign currency markets is about to shift from the Euro, which is now oversold in the extreme, to the Japanese yen, which has recently been sleepy.
?Oh, how I despise the yen, let me count the ways.?
I?m sure Shakespeare would have come up with a line of iambic pentameter similar to this if he were a foreign exchange trader. I firmly believe that a short position in the yen should be at the core of any hedged portfolio for the next decade.
To remind you why you hate the currency of the land of the rising sun, I?ll refresh your memory with this short list:
1) With the world?s structurally weakest major economy, Japan is certain to be the last country to raise interest rates. Interest rate differentials between countries are the single greatest driver of foreign exchange rates. That means the yen is taking the downtown express.
2) This is inciting big hedge funds to borrow yen and sell it to finance longs in every other corner of the financial markets. So ?RISK ON? means more yen selling, a lot.
3) Japan has the world?s worst demographic outlook that assures its problems will only get worse. They?re just not making enough Japanese any more. Countries that are not minting new consumers in large numbers tend to have poor economies and weak currencies.
4) The sovereign debt crisis in Europe is prompting investors to scan the horizon for the next troubled country. With gross debt well over a nosebleed 260% of GDP, or 130% when you net out inter agency crossholdings, Japan is at the top of the list.
5) The Japanese ten-year bond market, with a yield of only 0.33%, is a disaster waiting to happen. It makes US Treasury bonds look generous by comparison at 1.93%. No yield support here whatsoever.
6) You have two willing co-conspirators in this trade, the Ministry of Finance and the Bank of Japan, who will move Mount Fuji if they must to get the yen down and bail out the country?s beleaguered exporters and revive the economy.
When the big turn inevitably comes, we?re going to ?125, then ?130, then ?150. That works out to a price of $150 for the (YCS), which last traded at $90.50. But it might take a few years to get there.
If you think this is extreme, let me remind you that when I first went to Japan in the early seventies, the yen was trading at ?305, and had just been revalued from the Peace Treaty Dodge line rate of ?360.
To me the ?120.78 I see on my screen today is unbelievably expensive.
?
It?s All Over for the Yen
?All men dream, but not equally,? said T.E. Lawrence, known as Lawrence of Arabia.
Global Market Comments
March 19, 2015
Fiat Lux
Featured Trade:
(FRIDAY, APRIL 3 HONOLULU, HAWAII STRATEGY LUNCHEON)
(FED NOT TO RAISE INTEREST RATES IN 2015)
(IWM), (DXJ), (GLD), (FXE), (FXY), (USO), (TLT),
(TESTIMONIAL)
iShares Russell 2000 (IWM)
WisdomTree Japan Hedged Equity ETF (DXJ)
SPDR Gold Shares (GLD)
CurrencyShares Euro ETF (FXE)
CurrencyShares Japanese Yen ETF (FXY)
United States Oil ETF (USO)
iShares 20+ Year Treasury Bond (TLT)
Yes, that is the shocking truth that Fed chairman Janet Yellen told us today with the release of the central bank?s minutes.
Of course, she didn?t exactly say that she would raise interest rates for the first time in a decade in so many words. To discern that, you had to be fluent in Janetspeak.
Very few people have the slightest idea what comprises Janetspeak. It just so happens that I am quite knowledgeable in this arcane argot. In fact I can even negotiate a menu written entirely in Janetspeak and receive a meal reasonably close to what I thought I ordered.
I learned this esoteric language through private tutoring from none other than Janet Yellen herself. These I obtained while having lunch with her at the San Francisco Fed every quarter for five years.
It was a courtesy Janet extended not just to me, but to all San Francisco Bay area financial journalists. But fewer than a half dozen of us ever showed up, as monetary policy is so inherently boring, and government supplied food is never all that great. Ask any Marine.
So let me parse the words for you, the uninitiated. The Fed removed the crucial word ?patient? from its discussion. In the same breath, it says it is unlikely that rates will rise at the April meeting.
She said that any future rate rise would be conditional on continued improvement in the labor market. As the US economy is now approaching full employment, there seems to be little room for improvement there.
Now comes the vital part. Janet also said that an increase in interest rates would also be conditional on inflation returning to the Fed?s 2% inflation target!
Here?s a news flash for sports fans. Inflation is not rising. It is falling. Look no further than the price of oil, which kissed the $42 a barrel handle only this morning.
Inflation is at negative numbers in Europe and in Japan. Even the Fed?s own inflation calculation has price rises limited to 1% in 2015. Their best-case scenario does not have inflation rising to 2% until 2017 at the earliest.
Furthermore, things on the deflation front are going to get worse before they get better. Some one third of all the debt is Europe now carries negative interest rates.
Tell me about inflation when oil hits $20, which it could do in coming months, and will have a massive deflationary impact on the entire US economy, especially in Texas.
That?s the key to understanding Janet. When she says that she won?t raise rates until she sees the whites of inflations eyes, she means it.
I love the way that Janet came to this indirect decision, worthy of King Salomon himself. By taking ?patient? out of the Fed statement, she is throwing a bone to the growing number of hawks among the Fed governors.
At the same time she shatters any impact this action might have. The end result is a monetary policy that is even more dovish than if ?patient? has stayed in.
That is so Janet. No wonder she did so well as a professor at UC Berkeley, the most political institution in the world. I feel like I?m back at college.
You all might think I?m smoking something up here in the High Sierra, or that maybe a rock fell down and hit me on the head. But look at the market action. I?ll go to the video tapes.
Every asset class delivered a kneejerk reaction as if the Fed had just CUT interest rates. Stocks (IWM), bonds (TLT), the euro (FXE), the yen (FXY), OIL (USO), and gold (GLD) all rocketed. The dollar and yields dove.
This is the exact opposite of what every market participant expected, which is why the moves were so big. It is also why I went into this with a 100% cash position in my model trading portfolio.
We lost the word ?patient? we got the ?patient? result.
I had a batch of Trade Alerts cued up and ready to go expecting a dovish outcome. But it was delivered in such a left-handed fashion that I held back on the news flash. It was only when I heard the words from Janet herself that I understood exactly what was happening.
Out went the Trade Alert to buy the Russell 2000 (IWM)! Out went the Trade Alert to pick up some Wisdom Tree Japan Hedged Equity ETF (DXJ)!
Why the (IWM)? Because small caps are the American stocks least affected by a weak Euro.
Why the (DXJ)? Because the Fed action is an overwhelmingly ?RISK ON?, pro stock action. Unlike the rest if the world, the Japanese stock market has to double before it reaches new all time highs. It is just getting started.
Won?t today?s strong yen hurt the (DXJ)? Only momentarily. The Nikkei has yet to discount the breakdown from Y100 to Y120 that has already occurred, let alone the depreciation from Y120 to Y125 that is about to unfold.
Banzai!
Global Market Comments
March 18, 2015
Fiat Lux
Featured Trade:
(FRIDAY, APRIL 17 INCLINE VILLAGE, NEVADA STRATEGY LUNCHEON)
(THE BUY AND FORGET PORTFOLIO),
(SPY), (IXUS), (EEM), (VNQ), (TLT), (TIP)
SPDR S&P 500 ETF (SPY)
iShares Core MSCI Total Intl Stk (IXUS)
iShares MSCI Emerging Markets (EEM)
Vanguard REIT ETF (VNQ)
iShares 20+ Year Treasury Bond (TLT)
iShares TIPS Bond (TIP)
Global Market Comments
March 17, 2015
Fiat Lux
SPECIAL OIL ISSUE
Featured Trade:
(LAS VEGAS FRIDAY MAY 8 GLOBAL STRAGEGY LUNCHEON)
(MAD DAY TRADER JIM PARKER KILLS IT WITH AN OIL SHORT), (USO),
(HERE COMES THE NEXT PEACE DIVIDEND), (AAPL), (USO), (UUP), (TLT), (GLD), (SLV), (CU), (CORN), (SOYB)
(MORE PAIN TO COME IN OIL)
(USO), (XOM), (OXY), (COP), (AAL)
United States Oil ETF (USO)
Apple Inc. (AAPL)
PowerShares DB US Dollar Bullish ETF (UUP)
iShares 20+ Year Treasury Bond (TLT)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
First Trust ISE Global Copper ETF (CU)
Teucrium Corn ETF (CORN)
eucrium Soybean ETF (SOYB)
Exxon Mobil Corporation (XOM)
Occidental Petroleum Corporation (OXY)
ConocoPhillips (COP)
American Airlines Group Inc. (AAL)
Mad Day Trader Jim Parker is a modest guy. He has never been one to boast of his many achievements. If he does a great trade, he simply marks it in the ?WIN? column and moves on to the next trade.
I, however, am not Jim Parker.
As you may have noticed over the years, I have no hesitation whatsoever about singing my own praises, as well as those of others. So, I will bang his drum for him.
A week ago, Jim piled his followers into the (USO) March $17.5 puts at 35 cents. These are the short dated options which expire this coming Friday, March 20.
With a 15%, $7 crash in the price of oil that followed immediately afterwards, where are these options trading now? How about $1.50, a meteoric increase of 429%!
It gets better. The oil market is in the midst of a capitulation selloff, which could reach a crescendo with the Friday options and futures expiration. There is a distinct possibility that oil could visit the $30 handle then.
Where would that value the (USO) March $17.5 puts? How about $5.00. That would deliver a ten-day, eye popping profit of 1,429%!
While other newsletters promise these blistering results in their marketing blurbs, the Mad Hedge Fund Trader is one of the very few that actually delivers the goods.
This is nothing new for the Mad Hedge Fund Trader. It is only the latest in a series of prescient forecasts that we have been making about the energy markets for years.
Maybe the five years I spent in east Texas getting oil under my fingernails in the Barnet Shale have something to do with it.
To show you how far ahead of the curve I have been, I have included two archival pieces below.
The first was published in February, 2012 and lays out the logic behind my expectation that progress on nuclear talks with Iran would kill the risk premium the price of oil has enjoyed for years, taking it to as low as $30 a barrel, and lead to a Pax Americana.
That is exactly what is happening now, but my readers learned of the prospect three years in advance.
I ran the second piece in January 27 this year warning readers not to chase the oil rally because an impending storage Armageddon guaranteed that the worst was yet to come, the bottom for Texas tea. We hit new lows today.
Not only did I call the first oil crash, I nailed the second one as well.
I subscribe to a couple of very expensive oil industry newsletters that are great with passing on raw data about endless esoteric minutia, like rig counts, futures spreads and global demand at the micro level.
Not one saw the big picture, that the commodity that they live and breathe for was about to halve in price.
Enjoy the pieces. They are still relevant.
