Global Market Comments
April 11, 2016
Fiat Lux
Featured Trade:
(APRIL 22 NEW YORK STRATEGY LUNCHEON),
(INTRODUCING THE MAD HEDGE FACEBOOK/TWITTER MARKET FEED),
(WHAT TO DO ABOUT APPLE),
(AAPL), (CHL)
Apple Inc. (AAPL)
China Mobile Limited (CHL)
Come join me for the Mad Hedge Fund Trader?s Global Strategy Luncheon, which we will be conducting in New York, NY on Friday, April 22, 2016.
An excellent three course lunch will be provided. A wide ranging discussion 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 $249.
The formal luncheon will run from 12:00 to 2:00 PM. I?ll be arriving 30 minutes 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, click here.
If I get one question more than any other, it is what factors I take into consideration when making a market call.
It's a tough call because I keep track of hundreds of financial markets and data releases, from The Baltic Dry Index to the Japanese quarterly tankan.
Long-term followers have already subscribed to my Facebook and Twitter pages to receive a daily feed of my newsletter headlines.
As of this morning, I rated 1,704 ?likes? on Facebook and 1,791 ?followers? on Twitter.
Now I?m going to ramp up my game.
Frequently, market moving news or crucial technical conditions will arise which are important, but about which I lack the time to knock out a full 1,000 word opus in timely order. I bet you don?t have time to read it either.
Recently I have started posting short notes on these important developments on my Facebook and Twitter accounts to give you a quick update.
Usually a short sentence is enough to do the job, but occasionally I stretch to two.
This service addresses many issues.
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It is the world?s largest company.
It is the planet?s most widely owned stock.
Of the 200 million Americans who possess financial assets, probably all of them own Apple (AAPL), either directly through a trading account, or indirectly though an ETF (it is a massive 11.67% of the PowerShares QQQ), public or private pension fund.
So to say that traders are on pins and needles ahead of the upcoming quarterly earnings report would be an understatement.
A year ago, Apple issued one of the most perfect reports in the history of capitalism.
It blew away even the most optimistic forecasts, announcing earnings per share of $2.33, versus a consensus expectation of $2.16, and $1.75 last quarter.
The firm earned $13.6 billion in profits on $58 billion in gross profits, the largest quarterly profit in world history.
The company sold a staggering 61.2 million iPhones during the three-month period, 4 million more than expected. Insignificant iPad sales dropped from 13.9 to 12.6 million units. MacBooks were in line at 4.6 million units.
No mention was made whatsoever of problems with a strong dollar.? The company now sits on an unbelievable $194 billion in cash, the equivalent of the GDP of a medium sized country.
Most importantly, Apple expanded its share buy back program to $200 billion. The big question now is, will Apple buy another company, or a whole country?
Wow!
Since then the stock has been grinding sideways in the most tedious manner imaginable. It was a classic ?Buy the rumor, sell the news? set up.
Which leads many shareholders to ask if, now that the stock is owned by every taxi driver, elevator operator , and shoe shine boy in the country (now I?m showing my age!), are we headed for another 45% selloff, much like the last time the stock peaked out in 2012?
Certainly, the grounds for concern are out there.
There are now no new blockbuster products coming out until we see the iPhone 7 in September 2016.
There are supply chain worries, as the global manufacturing network is now absolutely mammoth.
Some analysts are nervous about quality control, especially regarding new products like the Apple watch, which should sell an eye popping 30 million units this year.
However, I think this time it?s different.
While you weren?t looking, Apple has turned into a China play. No, they aren?t suddenly eating dim sum with chopsticks at corporate headquarters in Cupertino.
The Middle Kingdom, in short order, has become the firm?s largest grower of its earnings. This is a good thing. Last year saw an 80% growth of sales there. China is expected to become the largest market for Apple products this year.
What?s more, the ballistic growth there is expected to continue. Walk down the street in Shanghai these days, and you are amazed by how many people are speaking or texting into their iPhones, real and fake ones alike.
In fact, they have become the primary means through which people access the Internet there.
No doubt, this is due to Apple?s special relationship there with China Mobile (CHL), which now offers iPhone owners a great deal for their cell phone service. Did I mention that (CHL) has a staggering 750 million customers?
The iWatch is now viewed as the gateway for the sales of as many as 1.2 million future third party developed apps, the number iTunes offers now.
Apple Pay looks to replace Visa and Master Card at some point in the future. Apple TV is still lurking out there in the background.
We?ll learn more about all of this at the next developers conference in San Francisco in June.
All of this leads me to believe that there is far more fundamental support in terms of new products and business lines for the company than we saw during the last cycle.
There is also more distance in the rear view mirror since the passing of Steve Jobs. Successor Tim Cook has since proved himself as a world-class leader.
It turned out the timing for the company to transition from a founder-tyrant to a cutting edge administrator-manager was perfect. You don?t need to hold your breath anymore.
At least the stock market thinks so.
Therefore, I expect to see a $1 trillion market capitalization for Apple sometime in 2018, well up from today?s $602 billion. I think that means you need to use the current dip to load up on the stock.
?If you?re early on in your career, and they give you a choice between
a great mentor or higher pay, take the mentor every time. It?s not even close. And don?t even think about leaving that mentor until your learning curve peaks,? said legendary hedge fund trader Paul Tudor Jones.
Global Market Comments
April 8, 2016
Fiat Lux
Featured Trade:
(APRIL 13 GLOBAL STRATEGY WEBINAR),
(APRIL 21 BOSTON GLOBAL STRATEGY LUNCHEON),
(DON?T BE SHORT CHINA HERE),
($SSEC), (FXI), (CYB), (CHL), (BIDU)
iShares China Large-Cap (FXI)
WisdomTree Chinese Yuan Strategy ETF (CYB)
China Mobile Limited (CHL)
Baidu, Inc. (BIDU)
?
Come join me for the Mad Hedge Fund Trader?s Global Strategy Luncheon, which I will be conducting in Boston, Massachusetts on Thursday, April 21, 2016.
A three-course lunch 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 tossing 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 $239.
I?ll be arriving at 11:30 AM and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a major hotel in the downtown area of the city near the waterfront.The location will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets, please click here.
Everyone who has been reading this letter for the past eight years (yes, there are quite a few of you), know that I am a fundamentalist first and a technician second.
Of course you need to use both, as those who mistakenly leave one tool in the bag reliably underperform indexes.
The one liner here is that I use fundamentals to identify broad, long term, even epochal trends, and technicals for the short-term timing of my Trade Alerts.
Do both well, and you will prosper mightily.
Strategists often like to cloak themselves in the fundamental or technical mantle. But parse their words carefully, and the best fundamentalists talk about support and resistance levels, while the ace technicians refer to the latest economic data points.
The reality is that the best of the best are using both all the time. The differential titles have more to do with marketing purposes than anything else.
Having said all that, you better take a good, hard look at the chart below for the Shanghai Stock Exchange Composite Index ($SSEC). This is a classic narrowing triangle spread over the entire five years of the Chinese bear market that is imminently going to explode one way or the other.
My bet is that it resolves to the upside. All it would be doing then is coming in line with the rest of the global equity markets, including those of many emerging markets.
Since the top, the earnings multiple of Chinese companies have plunged, from 35 times to a mere 15 times. This means that the 6% a year growing economy (China) is trading at a lower multiple than the 2% a year growing one (the US). The big question among strategists since 2009 has been how far these valuations would diverge.
If I am right, then you can expect a rally of at least 25% in the Shanghai market soon, and more in peripheral markets, like Hong Kong (EWH) and in single Chinese names.
The rally will also place a laser like focus on the Chinese Internet sector, so you won?t go wrong picking up some Baidu (BIDU) around $180, if you can get it.? I originally recommended buying the stock at $12 seven years ago.
If you are looking for further confirmation of the coming bull move in China across asset classes, please peruse the chart below for copper. The red metal has one of the closest correlations out there with the fate of the Middle Kingdom?s economy and stock markets. It appears to be breaking out of a major three-year downtrend as well.
The other nice thing about this scenario is that it provides more fodder for my expectation of another global bull market move in the fall, when you can expect major indexes to tack on another 5% by yearend.
Jim Chanos, watch your back!
?There is one thing that doesn?t diminish, and that is unintended consequences,? said legendary hedge fund trader Paul Tudor Jones.
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