Global Market Comments
September 25, 2018
Fiat Lux
Featured Trade:
(AI AND THE NEW HEALTH CARE),
(GOOGL), (XLP), (XLV), (MRK), (BMY), (PFE),
(MONDAY, OCTOBER 15, 2018, ATLANTA, GA,
GLOBAL STRATEGY LUNCHEON)
Come join John Thomas at the Mad Hedge Fund Trader’s Global Strategy Luncheon, which I will be conducting in Atlanta, Georgia, on Monday, October 15, 2018 at 12:00 noon. 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, energy, and real estate. And to keep you in suspense, I’ll be throwing a few surprises out there, too. Tickets are available for $238.
The lunch will be held at an exclusive private club in the downtown area of the city that will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets for the luncheons, please click here.
“Everything needs more data. The day is not far when you’ll need a gigabyte of flash in a smart phone,” said Sanjay Mehrotra, the CEO of Micron Technology.
Global Market Comments
September 24, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or IT’S FED WEEK),
(SPY), (XLI), (XLV), (XLP), (XLY), (HD), (LOW), (GS), (MS), (TLT),
(UUP), (FXE), (FCX), (EEM), (VIX), (VXX), (UPS), (TGT)
(TEN TIPS FOR SURVIVING A DAY OFF WITH ME)
20/20 hindsight is a wonderful thing, especially when all of your predictions come true.
In February, I announced that markets would trade in broad ranges until the run-up to the midterm elections. That is what has happened to a tee, with the decisive upside breakout taking place last week. From here on. You’re trying to buy dips for a year-end run-up to higher highs.
For many months I was the sole voice in the darkness crying out that the bull market was still alive, it was just resting. Now quality laggards are taking the lead, such as in Industrials (XLI), Health Care (XLV), Consumer Staples (XLP), and Consumer Discretionary (XLY).
Home Depot (HD), which I recommended a month ago has taken off for the races, as has competitor Lowes (LOW), thanks to a twin hurricane boost. Even the long dead banks have recently showed a pulse (MS), (GS).
Technology stocks are taking a long-needed rest after a torrid two-and-a-half-year run. But they’ll be back. They always come back.
It’s not only stocks that have broken out of ranges, so has the bond market (TLT), the U.S. dollar (UUP), and foreign currencies (FXE). Will commodity companies like Freeport-McMoRan (FCX) and emerging markets (EEM) be the last to pick themselves off the mat, or do they really need to see the end of the trade wars first?
Markets are essentially acting like the trade war is over and we won. Why would traders believe this? That’s what a Volatility Index touching $11 tells you and is why I have been telling them to avoid buying it all week. Because the president told them so.
Another not insignificant positive is that multinationals have been slow to repatriate foreign funds, so there is a lot more still abroad to buy back their own stocks.
Weekly jobless claims hit another half century low at 201,000. Major U.S. companies such as UPS (UPS) and Target (TGT) are planning record levels of Christmas hiring. By the way, this is what economic peaks look like.
The Senate passes a mini spending bill that keeps the government from shutting down until December 7. The budget deficit keeps on soaring, but apparently, I am the only one who cares. Live through a debt crisis like we had during the early 1980s and you’d feel the same way.
The data for housing continues to be terrible, and we saw our first increase in inventories in three years.
Finally, with people camping out overnight and lines around the block, Apple’s CEO Tim Cook opens the doors to the Palo Alto, CA, store at 9:00 AM sharp on Friday to three new phones. But did the stock peak at $230, as it has in past release cycles?
Last week, the performance of the Mad Hedge Fund Trader Alert Service forged a new all-time high and then gave it up on one bad trade. September is now unchanged at -0.32%. My 2018 year-to-date performance has retreated to 26.69%, and my trailing one-year return stands at 38.23%.
My nine-year return appreciated to 303.16%. The average annualized Return stands at 34.32%. I hope you all feel like you’re getting your money’s worth.
This coming week is all about the Fed, plus a plethora of housing data.
On Monday, September 24, at 10:30 AM, we learn the August Dallas Fed Manufacturing Survey.
On Tuesday, September 25, at 9:00 AM, the new S&P Corelogic Case-Shiller National Home Price Index for July, a three-month lagging indicator.
On Wednesday September 26, at 10:00 AM, the August New Home Sales is published. At 2:00 the Fed Open Market Committee announced its decision to raise interest rates by 25 basis points.
Thursday, September 27 leads with the Weekly Jobless Claims at 8:30 AM EST, which dropped 3,000 last week to 201,000, a new 43-year low. At the same time an update on Q2 GDP is published.
On Friday, September 28, at 9:45 AM, we learn the August Chicago Purchasing Managers Index. The Baker Hughes Rig Count is announced at 1:00 PM EST.
As for me,
Good luck and good trading.
I snowshoed some 600 miles last winter, most of it over 9,000 feet with a 60-pound pack.
And now the weather is getting nippy, so it is time to haul my well-worn snow shoes out of storage.
It is definitely a sport of mixed pleasures. The blisters and calluses that cover my feet hurt, but my blood pressure has dropped to 110/70. My knees ache, but my resting heart rate has plunged to 45.
In fact, the heart rate monitor at the local emergency room says that I am already dead. Did I mention that I'm developing bulging muscles in places I didn't know I had?
For those of you who wish to engage in this strenuous, bracing activity, or who are Mad enough to join me someday, I have included below a list of tips on how to get the most out of it.
1) Layer your clothes. You'll want to strip down to your T-shirt hauling a load uphill at 30 degrees. On the way down, you'll need to add a layer back on, and a second and third when the sun sets.
2) When the temperature drops below 10 degrees, you can't have any exposed skin. Bring along a knit hat, neck warmer or scarf, and a second pair of silk glove liners. No pair of pants can keep you warm when it's this cold. So REI makes these great silk long underwear, which are a must have (click here). Don't worry about changing out in the open. There's nobody up here.
3) Walking on the snow for six hours will cut through even the heaviest wool socks. So, put a heavy neoprene insert into your boots for extra insulation. It will keep those dogs warm and toasty.
4) Bring an old pair of ski goggles in case the wind picks up. That way the tears won't freeze on your face.
5) Fill your canteens with boiling water right when you leave or they will freeze solid before you get home. Drinking warm water on the slopes will reheat your core.
6) Include an expedition quality, four-season tent and a -20 degree-rated sleeping bag in your pack. If you break your ankle, or trip on your snowshoes and break your arm, it could be a couple of days before Search and Rescue finds you. (Learned that the hard way).
7) MSR Lightening Ascent 30's are to die for, the Rolls Royce of snowshoes (click here). They have a fold up bar which allows you to stair step your way straight up the side of a hill. Buy the extra five-inch floating tails for carrying heavy loads in fresh deep powder. These are highly recommended by Alaskan winter pipeline surveyors. That's good enough for me. Rental snowshoes tend to be cheap ones that you will regret.
8) Keep anything electronic, like an iPhone, a GPS, or car keys in an inside pocket where your body heat will keep them warm. Leave them in your pack and they freeze solid, becoming useless. Good luck calling the Auto Club in a snowstorm at a high mountain pass after 10 PM. (Also learned the hard way). If you ignore this advice and your keys freeze, stick them in your armpit. Your car will start right up in 15 minutes.
9) Completely plaster your face with SPF 70 sunscreen. The reflection from snow covered slopes and the high-altitude UV will fry you if you don't, especially your nose.
10) Bring an old-fashioned compass. You don't want to bet your life on the fancy electronic gizmos from Best Buy. Otherwise, you'll walk right off a cliff in the white out conditions of a blizzard. (Again, learned the hard way).
Well, I'm sure you're all raring to go after this description of my days off. See you on the mountain.
The Newsletter That Bares All
“Data mining is risky when only focusing on the past. When a decision is widely believed it becomes widely used. The value of a widely known insight disappears over time. Some decision rules become so popular that it becomes wiser to do the opposite. Computers have no common sense,” said the legendary hedge fund manager Ray Dalio.
Global Market Comments
September 21, 2018
Fiat Lux
Featured Trade:
(SEPTEMBER 19 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (VIX), (VXX), (GS), (BABA), (BIDU), (TLT), (TBT),
(TSLA), (NVDA), (MU), (XLP), (AAPL), (EEM),
(MONDAY, OCTOBER 15, 2018, ATLANTA, GA,
GLOBAL STRATEGY LUNCHEON)
Below please find subscribers’ Q&A for the Mad Hedge Fund Trader September 19 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.
As usual, every asset class long and short was covered. You are certainly an inquisitive lot, and keep those questions coming!
Q: Do you expect a correction in the near term?
A: Yes. In fact, we may even see it in October. Markets (SPY) have been in extreme, overbought territory for a month now, the macro background is terrible, trade wars are accelerating, and interest rates are rising sharply. The only thing holding the market up is the prospect of one more quarter of good earnings, which companies start reporting next month. So once that’s out of the way, be careful, because people are just hanging on to the last final quarter before they sell.
Q: I just got out of my cannabis stock, what should I do now?
A: Thank your lucky stars you got away with that—it was an awful trade and you made money on it anyway. Stay away in droves. After all, the cannabis industry is all about growing a weed and how hard is that? This means the barriers to entry are zero. In fact, I’m thinking of growing some in my own backyard. My tomatoes do well, so why not Mary Jane?
Q: The Volatility Index (VIX) is now at $11.79—should I buy?
A: No, the rule of thumb for the (VIX) is to wait for it to sit on a bottom for one to two weeks and let some time decay work itself out. You’ll see that in the ETF, the iPath S&P 500 VIX Short-Term Futures ETN (VXX). When it stops breaking to new lows, that means it’s ready for another bounce. I would wait.
Q: What do you think about banks here? Is it time to get in?
A: No, these are not promising charts. If anything, I’d say Goldman Sachs (GS) is getting ready to do a head and shoulders and go to new lows. I would stay away from financials unless I see more positive evidence. The industry is ripe for disruption from fintech, which has already started. That’s said, they are way overdue for a dead cat bounce. That’s a trade, not an investment.
Q: Would you short Alibaba (BABA) and Baidu (BIDU) here?
A: No. Shorting is what I would have done six months ago; now it’s far too late. If anything, I would be a buyer of those stocks here, based on the possibility that we will see progress or an end to the trade war in the next couple of months. If the trade wars continue, they will put the U.S. in recession next year, and then you don’t want to own stocks anywhere.
Q: Is Apple (AAPL) going to get hit by the trade wars?
A: So far, this has not been the case, but they are whistling past the graveyard right now—an obvious target in the trade wars from both sides. For instance, the U.S. could suddenly start applying a 25% import duty to iPhones from China, which would make your $1,000 phone a $1,250 phone. Similarly, the Chinese could hit it in China, restricting their manufacturing in one way or another. I’m being very cautious of Apple for this reason. The stock already has one $10 drop just because of this worry.
Q: Can the U.S. ban China from selling bonds?
A: No, they can’t. The global U.S. Treasury bond market (TLT) is international by nature—there is no way to stop the selling. It would take a state of war to reach the point where the Fed actually seizes China’s U.S. Treasury bond holdings. The last time that happened was when Iran seized the U.S. embassy in Tehran in 1979. Iran didn’t get its money back until the Iran Nuclear Deal in 2015. Before that you have to go back to WWII, when the U.S. seized all German and Japanese assets. They never got those back.
Q: What are your thoughts on the chip sector?
A: Stay away short-term because of the China trade war, but it’s a great buy on the long term. These stocks, like NVIDIA (NVDA) and Micron Technology (MU) have another double in them. The fundamentals are outrageously good.
Q: Is the market crazy, or what?
A: Yes, it is crazy, which is why I’m keeping 90% cash and 10% on the short side. But “Markets can remain irrational longer than you can stay liquid,” as my friend John Maynard Keynes used to say.
Q: What’s your take on the Consumer Staples sector (XLP)?
A: It will likely go up for the rest of the year, into the Christmas period; it’s a fairly safe sector. The uptrend will remain until it doesn’t.
Q: Should we buy TBT now?
A: No, the time to buy the ProShares Ultra Short 20+ Year Treasury ETF (TBT) was two months ago. Now is the time to sell and take profits. I don’t think 10-year U.S. Treasury yields (TLT) are going above 3.11% in this cycle, and we are now at 3.07%. Buy low and sell high, that’s how you make the money, not the opposite.
Q: Does this webinar get posted on the website?
A: Yes, but you have to log in to access it. Then hover your cursor over My Account and a drop-down menu magically appears. Click on Global Trading Dispatch, then the Webinars button, and the last nine years of webinars appear. Pick the webinar you want and click on the “PLAY” arrow. Just give us a couple of hours to get it up.
Q: Can Chinese companies use Southeast Asia as a conduit to export to the U.S.?
A: Yes. This is an old trick to bypass trade restrictions. For example, most of the Chinese steel coming into the U.S. is through third countries, like Singapore. Eventually they do get found out, at which point companies or imports from Vietnam will be identified as Chinese origin and get hit with the import duties anyway, but it could take a year or two for those illegal imports to get discovered. This has been going on ever since trade started.
Q: Will the currency crisis in Argentina and Turkey spread to a global contagion?
A: Yes, and this could be another cause of a global recession late next year. The canaries in the coal live there (EEM).
Q: Would you use the DOJ probe to buy into Tesla (TSLA)?
A: No, buy the car, not the stock as it is untradeable. This is in fact the third DOJ investigation Tesla has undergone since Trump came into office. The last one was over how they handled the $400 million they have in deposits for their 400,000 orders. It turns out it was all held in an escrow account. There are easier ways to make money. It’s a black swan a day with Tesla. This is what happens when you disrupt about half of the U.S. GDP all at once, including autos, the national dealer network, big oil, and advertising. All of these are among the largest campaign donors in the U.S.
Time to Bring Out the Big Guns
Global Market Comments
September 20, 2018
Fiat Lux
SPECIAL VOLATILITY ISSUE
Featured Trade:
(SHOPPING FOR FIRE INSURANCE IN A HURRICANE),
(VIX), (VXX), (XIV),
(THE ABC’s OF THE VIX),
(VIX), (VXX), (SVXY)
