Dilbert cartoonist Scott Adams argues that you should invest in companies you hate, because only the most unprincipled and rapacious firms make the greatest profits.
Moral bankruptcy is a great leading indicator of success, and the best ones can get you to balance your wallet on the end of your nose and bark like a seal, as you buy products that you utterly despise. Companies with the work ethic of a serial killer, like British Petroleum (BP) come to mind, but you can also add other firms to the list, like Goldman Sachs (GS), Citicorp (C), Pfizer (PFE), and Altria (MO).
Adams initially started investing in companies he loved, like Enron, WorldCom, and Webvan, and absolutely lost his shirt. His advice to (BP) is not to waste money on artificial, sincere, maudlin ad campaigns apologizing, but get us to hate them more. Bring on more dead bird pictures!
Hand Me a &*%@* Buy Ticket!
Global Market Comments
April 26, 2013
Fiat Lux
Featured Trade:
(WHY I?M COVERING MY BOND SHORTS),
(TLT), (TBT)
(STEVE JOBS? LAST LAUGH), (AAPL),
(GRAPES OF WRATH REDUX)
iShares Barclays 20+ Year Treas Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
Apple Inc. (AAPL)
Nothing beats instant gratification. Bragging rights are nice too.
On Monday, when I strapped on this trade, angry readers emailed me to tell me that I was truly out of my mind. Apple was an ex-growth company, had lost its ability to innovate, shed its ?cool? factor, and had fallen behind Samsung with its large screen smart phone. The shares were clearly in a free fall to under $300, and I had to be ?Mad? to urge people into the stock at $395.
The Tuesday Q1, 2013 earnings changed everything. Revenues blew out to the upside at $43 billion, profits surprised at $9.5 billion, and earnings shocked, coming in at $10.09. Analyst forecasts minutes earlier ran as low as $8. The company sold a stunning 37.4 million iPhones and 19.5 million iPads.
Best of all, it returned a wad of cash to shareholders; increasing the dividend by 15% and boosting its share buyback program to $60 billion. It can afford to do so because it has an unprecedented $145 billion in cash on its balance sheet.
Not only is Apple now a value stock, it is a high yield value stock, offering investors a 3% annual yield at these prices, compared to only 2% for the S&P 500. Pension funds will not ignore this for long.
All of a sudden, Apple has recovered its ?cool? factor and is back at the forefront of innovation. Its dominance in apps and iTunes gives it a huge sinecure in risk free income. The six or so new products it will launch in the fourth quarter of this year, like a low end smart phone for emerging markets, Apple TV, the iPhone 5s, a deal with China Mobile, and new generations of iPods and iPads, all look incredibly interesting. What a difference three days makes!
So it is time for me to take profits on my (AAPL) May, 2013 $320-$350 Call spread. I?m really doing this so I can print out the confirm and carry it around in my wallet next to my spare condom. That way I can whip it out and prove any bar challengers that I made money in Apple on the long side this year, no easy task.
I am also encouraged to take profits here because I have captured 95% of the potential profit in the call spread. Why bother carrying a position in one of the most volatile stocks in the market for three more weeks for an extra 2 basis points?
For options traders, there was something really interesting that happened to Apple this week. Although the shares have risen only $15, or 3.8% in three days, the value of my deep out-of-the-money call spread has soared by 11.4%. That is because implied volatilities on the options have completely crashed. This suggests that the last bottom in Apple shares at $392 is the final one.
I think there is a high probability that the final bottom is in for Apple shares. Sure, the Q2, 2013 revenue forecast was dire at only $33.5-35.5 billion, but everyone expected this. We will know for sure if the stock can break the 50-day moving average at $435. If it does, then it is off to the races once again, and $500 becomes a chip shot. That means flipping from selling rallies to buying dips, possibly for years. But it will take years to breach the old high of $706 once more.
Let me tell you how they could get there. What if the Federal Reserve normalizes interest rates and raises overnight rates from zero to 2%? Apple?s $145 billion cash mountain would throw off an extra $3 billion in interest income a year, boosting the company?s profits, and possibly its share price, by a third. Imagine that? Steve Jobs? ghost must be laughing!
Looks Like Steve Will Have the Last Laugh
It?s another sign of the times when the weekend fruit picker population is doubled by people hard hit by the economy, looking to save money on food costs.
After driving through miles of undulating brown hills studded with oak trees, passing mile upon mile of horse ranches, rusted out cars, and abandoned mobile homes, you come to Brentwood, the fruit capital of Northern California. There, thousands of families, half from Asia, harvest ripe bing cherries and peaches at the wholesale price of $1 a pound, fruit that normally costs $6 a pound at the supermarket. It all is a great opportunity to teach young kids the value of hard work, and where their food comes from. Anything you eat in the orchard is free, an old California tradition. No doubt none of these people are counted in the government?s employment statistics.
It is all a great deal if you don?t mind having purple fingertips at the end of the day. Just watch out for the cars pulled over on the side of the road on the way home, their occupants puking out all their excess cherries. In a nod to the 21st century, growers in this Grapes of Wrath industry compile lists of email addresses, and notify their itinerant fruit pickers which crops are ready for harvest via the Internet. Also on the calendar this season are grapes, apples, apricots, plums, loquats, nectarines, mandarin oranges, and wheel chair accessible walnuts (?)
At the end of each harvest, professional crews sweep through and pick up what?s left, if the prices will bear it. If you wonder why we put up with the earthquakes, high taxes, gridlocked politics, and a non-functioning state government, this is the reason.
By the way, does anyone know what to do with 50 pounds of cherries? Send me your recipes.
Global Market Comments
April 25, 2013
Fiat Lux
Featured Trade:
(MAY 8 LAS VEGAS STRATEGY LUNCHEON),
(SELL IN MAY HAS ALREADY STARTED),
(SPY), (IWM), (TLT), (TBT), (GLD), (SLV), (USO), (UNG),
(CHINA?S VIEW OF CHINA), (FXI), (EEM)
SPDR S&P 500 (SPY)
iShares Russell 2000 Index (IWM)
iShares Barclays 20+ Year Treas Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
United States Oil (USO)
United States Natural Gas (UNG)
iShares FTSE China 25 Index Fund (FXI)
iShares MSCI Emerging Markets Index (EEM)
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Las Vegas, Nevada on Wednesday, May 8, 2013. 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. I will also explain how I have been able to deliver a blowout 40% return since the November, 2012 market bottom. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets are available for $179.
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 PowerPoint presentation will be emailed to you three days before the event.
The lunch will be held at a major Las Vegas hotel on the Strip, the details will be emailed with your purchase confirmation. Please make your own hotel reservations, as business there is booming.
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 ran into Minxin Pei, a scholar at the Carnegie Endowment for International Peace who imparted to me some iconoclastic, out of consensus views on China?s position in the world today.
He thinks that power is not shifting from West to East; Asia is just lifting itself off the mat, with per capita GDP at $5,800, compared to $48,000 in the US. We are simply moving from a unipolar to a multipolar world. China is not going to dominate the world, or even Asia, where there is a long history of regional rivalries and wars.
China can?t even control China, where recessions lead to revolutions, and 30% of the country, Tibet and the Uighurs, want to secede. China?s military is entirely devoted to controlling its own people, which make US concerns about their recent build up laughable.
All of Asia?s progress, to date, has been built on selling to the US market. Take us out, and they?re nowhere. With enormous resource, environmental, and demographic challenges constraining growth, Asia is not replacing the US anytime soon.
There is no miracle form of Asian capitalism; impoverished, younger populations are simply forced to save more, because there is no social safety net. Try filing a Chinese individual tax return, where a maximum rate of 40% kicks in at an income of $35,000 a year, with no deductions, and there is no social security or Medicare in return. Ever heard of a Chinese unemployment office or jobs program?
Nor are benevolent dictatorships the answer, with the despots in Burma, Cambodia, North Korea, and Laos thoroughly trashing their countries. The press often touts the 600,000 engineers that China graduates, joined by 350,000 in India. In fact, 90% of these are only educated to a trade school standard. Asia has just one world-class school, the University of Tokyo.
As much as we Americans despise ourselves and wallow in our failures, Asians see us as a bright, shining example for the world. After all, it was our open trade policies and innovation that lifted them out of poverty and destitution. Walk the streets of China, as I have done for nearly four decades, and you feel this vibrating from everything around you. I?ll consider what Minxin Pei said next time I contemplate going back into the (FXI) and (EEM).
China: Not All it?s Cracked Up to Be
Global Market Comments
April 24, 2013
Fiat Lux
Featured Trade:
(JULY 2 NEW YORK STRATEGY LUNCHEON),
(THINGS ARE HEATING UP IN MEXICO),
(EWW), (UMX), (BSMX), (EEM),
(BUDGET CUTS HOT THE WILD ANIMAL MARKET)
iShares MSCI Mexico Capped Invstbl Mkt (EWW)
ProShares Ultra MSCI Mexico Cppd IMI (UMX)
Grupo Financiero Santander S.A.B. de C.V. (BSMX)
iShares MSCI Emerging Markets Index (EEM)
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.
In case you missed it, the second hand animal market has crashed. Forced to slash budgets by cash starved municipalities, the nation?s public zoos have been paring back their collections of living exhibits.
The Washington Zoo is trying to offload a 7,000 pound hippopotamus; while the San Francisco Zoo is short some tigers after one ate a visitor and had to be shot. The Portland Zoo was able to liquidate a portfolio of lemurs only because of the popularity of the recent DreamWorks? ?Madagascar 3? animated film.
When zoos are forced to economize, they downsize the big eaters first to save on feed costs; hence, the absence of elephants in San Francisco (Could this be a political gesture?). In fact, zoo staff was recently busted for illegally harvesting acacia on private property, a favorite food of giraffes, which grows wild here after its introduction a century ago.
The hardest to move? Baltimore has been trying to sell its snake collection for two years now. Talk about an illiquid market. Maybe they should try AIG. Snake derivatives anyone?
