Featured Trades: (SPECIAL BATTERY ISSUE),
(XIDE), (BYDFF), (SQM), (SNE), (GM), (XOM)
FOR PAID SUBSCRIBERS ONLY
1) The Great Race for Battery Technology.
The End is Near for the US
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Tesla
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Nissan Leaf
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Toyota Prius
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Meet My New Laptop
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I Don't Look 151 Years Old, Do I?
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BYD F3
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Karma
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Anything for a Green Card
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Its Easy, Just Read the Manual
Featured Trades: (CISCO SYSTEMS), (CSCO)
3) A Nice Update on Cisco Systems. For those of you who caught my trade alert to buy the Cisco Systems (CSCO) $20-$22 bull call spread last week and where hoping to get it at lower prices can forget about it. I spoke to an analyst today whose outlook for the networking giant was even more optimistic than mine.
The company has announced an incredibly aggressive buy back program that will soak up 17% of its outstanding shares on any further dip in prices. Cash on the balance sheet has ballooned from $38 billion last year to a staggering $45 billion today. Its fundamental business is rock solid, which it has successfully moated against any potential competitor. All of the mega trends currently in play in the online world, like cloud computing and the upgrade to video streaming, play directly into Cisco's hands. The income statement and cash flow couldn't be healthier.
He believes that the current 30% dip from the April high was purely sentiment driven and creates the buying opportunity of a lifetime. According to his estimates, CSCO is currently selling at 12 times next year's earnings. Get a multiple expansion on the upside, and you could see the shares rocket from today's $19.55 to as high as $28 in the foreseeable future. If for some reason you are unable to employ the options strategy here, the outright stock is a huge buy here.
Just thought you'd like to know.
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Cisco is Looking Impenetrable
Featured Trades: (MUSTANGS)
4) The Bull Market in Mustangs. The Western US has found a new wrinkle in the housing collapse, where homeowners are desperately struggling to cut living costs to meet the next doubling of their adjustable rate mortgage payments on their underwater houses.
Raising horses can cost more than children, so Nevadans are turning them loose to join herds of wild mustangs, to dodge the $30,000/year it costs to board and care for these voracious animals. Local populations are exploding, eating local ranchers out of house and home, who depend on public grazing lands to feed commercial livestock.
Recently, the Bureau of Land Management held hearings on where to place 25,000 excess animals. Mustangs are the feral descendents of horses which escaped the conquistadores, and there are now thought to be 30,000 running wild, down from a 19th century peak of 2 million. The BLM has another 30,000 in pens, and is making 10,000/year available for adoption at $125/each.
The problem is that many adopt 'pets' who then flip them to Canadian slaughterhouses, which cater to the odd French taste for horseflesh. To see how this works, watch Clark Gable, Marilyn Monroe, and James Dean's last film, The Misfits.
Madeleine Pickens, the wife of famed oil trader T. Boone Pickens, has offered to take the BLM's entire herd and put them out to pasture at an undisclosed million acre location. If there is anyone who could have an undisclosed million acres, it is Boone. I have frequently run into majestic and beautiful mustang herds over the years while camping in the remote desert (no, I don't go to Burning Man). Reminding me that there is still some 'wild' in the 'West', I will miss them when they are gone.
Featured Trades: (SPY), (EWJ)
Japan iShares ETF
2) Why I'm Avoiding Japan Like the Plague. Now look at the world's worst population pyramid, that for Japan (EWJ). These three graphs show that a nearly perfect pyramid drove a miracle stock market during the fifties and sixties which I remember well, when Japan had your textbook high growth emerging market economy. That changed dramatically when the population started to age rapidly during the nineties. The 2007 graph is shouting at you not to go near the Land of the Rising Sun, and the 2050 projection tells you why.
By then, a small young population of consumers with a very low birth rate will be supporting the backbreaking burden of a huge population of old age pensioners. Every wage earner will be supporting one retiree. Think low GDP growth, huge government borrowing, deflation, collapsing bond markets, a depreciating yen, and terrible stock and housing markets. If you are wondering why I believe that a short position in the yen should be a core position in any portfolio for the next decade, this is a big reason. Dodge the bullet. Enjoy their food and hot tubs, but not their stocks.
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Featured Trades: (PANIC BUYING OF THE TBT), (TBT)
2) Panic Buying Hits the (TBT). Buy the rumor, sell the news. That is one of the oldest adages one hears on trading desks, and it was never more true than today. Yesterday we learned that the ratings agency, Moody's, is considering a downgrade of US government debt in the wake of the tax compromise, as it should, the first time ever. The Producer Price Index came in at a healthy 0.8%, much better than expected, suggesting that the economy is far more robust than people realize. Retail sales popped 0.8% as well, telling us that people are falling back into their old habits of Christmas shopping with reckless abandon. You could not image more bond negative news hitting the tape, or more positive developments for the (TBT). And of course, the tax compromise was the gasoline that hit the fire.
We've had a great run here for the (TBT), tacking on and impressive 35% since the August bottom. The yield on the 30 Year Treasury bond has soared from 3% to 4.6% during this time. Those lucky few who signed up with Macro Millionaire immediately and executed every trade that I suggested are now up 10.25% in two weeks in their initial position. In a zero return world, that is much better than a poke in the eye with a sharp stick. Don't count on every one of my trades to deliver such stellar returns so quickly.
I am taking a quick profit here and selling my entire position. That will enable me to duck the carrying costs for the (TBT) over the holidays, which are now running at nearly a very heavy 1% a month, one of the highest in ETF land. It will allow more time for this ETF to grind through the 200 day moving average, which has clearly presented a short term ceiling on prices. And it gives me some dry powder I can use to take advantage of any dips in the New Year. My long term target for the (TBT) is still $200, but you have to allow the market to breathe along the way. And no one ever got fired for taking a profit.
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Give Me My TBT!
SPECIAL COPPER ISSUE
Featured Trades: (COPPER), (CU), (JJC), (ECH), (FCX)
FOR PAID SUBSCRIBERS ONLY
1) Copper Turns Into Gold.
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Want to Race for Pink Slips?
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Featured Trades: (ECONOMY UPGRADE FEVER),
($SSEC), (SSO), (X), (CU), (COPPER)
1) The Upgrade Fever Pandemic. I knew it, I knew it, I knew it. As soon as Bill Gross at bond giant, PIMCO, announced that it was off to the races with a 1% mark up in his GDP forecast for 2011, upgrade fever would break out all over.
I look no further than my alma mater, Morgan Stanley, which followed suit with their revision for economic growth from 2.9% to 4.0%. David Greenlaw thinks that the tax deal Obama cut with the Republicans, to the chagrin of his own party, is great for exports, consumer spending, and capital spending. A sudden fall in weekly jobless claims by 17,000 to only 421,000 suggests he may be right. A sleigh full of more economic releases arrives this week, and I expect them all to surprise to the upside, leading to a further surge in corporate profits. Needless to say, this is all hugely bullish for equities.
The other big development is that China (FXI) postponed its next interest rate rise by a few weeks, delivering a nice pop for the Shanghai market ($SSEC), and triggering a global melt up in commodities. Copper (CU) hit a new all time high today, and steel names, like US Steel (X) were on fire. I have a very heavy weighting in the sector in my long term portfolio, but my short term trading book is out for the moment, as the overheating is starting to scare me.
The 'FEAR' to 'CONFIDENCE' trade is on, and Santa Claus is mixing steroids into the reindeer feed as we speak to deliver a continued rally. Did I mention this is all hugely bullish for equities? It all makes my (SSO) position, the 200% leveraged bet that the S&P 500 is going up, smell like roses.
Optimism is Breaking Out All Over
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My (SSO) Position is Smelling Like Roses
Featured Trades: (NISSAN LEAF), (NSANY)
2) The Nissan Leaf Roll Out. With great fanfare and celebration, Nissan Motors (NSANY) at long last delivered its first all electric, 100 mile range Leaf to an ecstatic customer at San Francisco city hall today. Long time readers of this letter know that I have been banging the table on this technology for some time, starting with my now ancient recommendation to buy Sociedad Quimica Y Minera (SQM), Chile's largest producer of lithium (click here for the piece).
Offering a car which effectively uses no fuel, requires no maintenance, at a heavily government subsidized price could only be a blow out success. One of the most aggressive and ambitious adverting campaigns in history assured that even Neolithic consumers living in caves in Borneo would know about it. Nissan is confidently betting the company that the project will be a blow out success, ramping global production up to 500,000 annually by the end of next year. My local utility, PG&E, (PGE) has since upped the ante by cutting prices for electric vehicle recharges between 12:00 midnight at 7:00 am from their peak rate of 40 cents per kilowatt hour to only 3 cents, a 92.5% discount. That works out to buying all the gasoline equivalent I want at 14 cents a gallon.
I predicted that these developments would conspire to drive the shares of Nissan Motors ever Northward. Nissan has been in my model portfolio for a while as a play on the recovery of the global auto industry. Those who piled into my initial recommendation to buy the stock last July are now up a handy 30% (click here for the 'Making a New Home for My Nissan Leaf').
For those of us who have been involved in the alternative energy space, this has been a very long time in coming, some 40 years in my case. Since I am neither a movie star nor a lucky lottery winner, I will not get delivery of my own Leaf until March, 2011. But the dealer has already called, asking which options I wanted. Fully loaded with all the bells and whistles, even with the $1,200 solar cell roof that looks cool more than it is functional, it will cost me $38,000. When I do get what will undoubtedly be the most enviable wheels on the block, you'll be the first to hear about it. Buy a new two year subscription to my letter, and I might even give you a ride.
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'This is the ultimate Keynesian stimulus. We debated all summer and Keynes won. This is $800-$900 billion of stimulus over the next two years. This guarantees that the economy will surprise to the upside,' said Greg Valliere, chief research strategist at the Potomac Group.
Featured Trades: (SOARING WITH THE EAGLES),
(SLV), (AGQ), (GLD), (TBF), (TBT), (XLF), (BAC), (YCS)
1) Soaring With the Eagles. I was sleeping like a rock last night, having one of those great flying dreams. I dove, rolled, and looped through the clouds, and soared with the eagles, my arms stretched out like wings. The phone rang. I looked at the clock. It was 2:00 am. What else was new? After 40 years in the business, I seemed to have developed a supercharged internal adrenaline pump that jolts me into full combat mode in seconds, firing on all 16 cylinders. Such is the life of a global macro long/short hedge fund manager.
It was my friend, Ming, at the People's Bank of China in Beijing. They had just raised reserve bank requirements by 50 basis points, and another interest rate hike was in the works. Leaks of the impending move had prompted traders to dump holdings of commodities, energy, and precious metals, expecting the move to cool economic growth by the Chinese economic juggernaut. This is why silver (SLV), (AGQ) dove from $30.60 to $28 in recent days, and gold (GLD) backtracked from $1,430 to $1,374.
The wheels whirred away in my mind, calculating how this news would impact my trading book, which was long US stocks (SSO) and financials (BAC), (XLF), and short Treasury bonds (TBF), (TBT) and the yen (YCS). I concluded that I was perfectly positioned, and that my longs should go up and my shorts would go down. Back to soaring with the eagles.
I was just coming out of a white fluffy cloud when the phone rang again. It was 4:00 am. A friend at bond investment giant, PIMCO, in San Diego, CA was calling to tell me that they were upgrading their growth forecast for 2011 from an anemic 2.0%-2.5% range to a more virile 3.0%-3.5%. The rerating was off the back of the tax compromise between the President and the Republican leadership, and the massive, short term government stimulus that was working far better than imagined or publicized.
If there is one guy who's every word I hang on, it is PIMCO's eclectic managing director Bill Gross. This is not just because he was an ex-hippy, former Vietnam War swift boat veteran, who worked his way through college counting cards at blackjack in Las Vegas at the same time I did. We may well have sat at the same tables (play the videotape!). I think Bill and his cohorts, Mohamed El-Erian and Paul McCulley, are one of a tiny handful of people who have nailed it with their understanding of the global economy and the consequences for financial markets and asset classes. So we are usually reading from the same sheet of music.
I could see this easily leading to a round of competitive upgrades of forecasts by other financial institutions as we run into year end. Needless to say, this is a hugely positive backdrop for stocks. The wheels whirred again, popping out the same conclusion. If anything, my trading book looked even better. It was too late to soar with anymore damn eagles, so I staggered out of bed to do some flying of a different sort. I checked prices, and was reassured that the markets agreed with my analysis. It wasn't until noon that I realized that in the dark I had put on my boxer shorts backwards.
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Come Fly With Me