Global Market Comments
August 10, 2016
Fiat Lux
SPECIAL CRISPR TECHNOLOGY ISSUE
Featured Trade:
(HOW CRISPR TECHNOLOGY MAY SAVE YOUR LIFE),
(TMO), (OVAS), (CLLS), (SGMO)
Thermo Fisher Scientific, Inc. (TMO)
OvaScience, Inc. (OVAS)
Cellectis S.A. (CLLS)
Sangamo Biosciences Inc. (SGMO)
Global Market Comments
August 9, 2016
Fiat Lux
Featured Trade:
(WHY THE BULL MARKET IS ALIVE AND WELL),
(FB), (IBB), (TSLA), (BAC), (JPM), (NFLX), (LEN),
(THE RECEPTION THAT THE STARS FELL UPON)
Facebook, Inc. (FB)
iShares Nasdaq Biotechnology (IBB)
Tesla Motors, Inc. (TSLA)
Bank of America Corporation (BAC)
JPMorgan Chase & Co. (JPM)
Netflix, Inc. (NFLX)
Lennar Corporation (LEN)
Fall is approaching, when my most loyal subscribers are to be found taking transcontinental railroad journeys, crossing the Atlantic in a first class suite on the Queen Mary 2, or getting the early jump on the Caribbean beaches.
What better time to spend your trading profits than after all the kids have gone back to school, the summer vacation destination crush has subsided, and travel deals abound.
It?s an empty nester's paradise.
Trading in the stock market is reflecting as much, with an increasingly narrowing range since the S&P 500 hit a new all time high in mid-July.
Is it really August already?
It?s as if through some weird, Rod Serling type time flip, June became August, when we usually get our half year low, thanks to the ill conceived Brexit.
Welcome to the misplaced summer market.
I say all this, because the longer the market moves sideways, the more investors get nervous and start bailing on their overweight cash positions.
Call it FOMO: the Fear of Missing Out.
The perma bears are always out there in force (it sells more newsletters), and with the memories of the 2008 crash still fresh and painful, the fears of a sudden market meltdown are constant and ever present.
In the minds of many newly gun-shy traders, the next 1,000 point flash crash is only an opening away.
Only a short position in the Japanese yen (FXY) seems to be working today, which followers of my Trade Alert Service have in abundance.
In fact, nothing could be further from the truth.
What we are seeing unfold here is not the PRICE correction that people are used to, but a TIME correction, where the averages move sideways for a while.
Eventually, the moving averages catch up, and it is off to the races once again.
The reality is that there is a far greater risk of an impending market MELT UP IN STOCK PRICES than a melt down. But to understand why, we must delve further into history, and then the fundamentals.
For a start, many investors have not believed in this bull market for a nanosecond from the very beginning. They have been pouring their new cash into the bond market instead. The ultra low yields prove my point.
Some 95% of active managers are underperforming their benchmark indexes this year, the lowest level since 1997, compared to only 76% in a normal year.
Therefore, this stock market has ?CHASE? written all over it.
Too many managers have only four months left to make their years, lest they spend 2017 driving a taxi for Uber and handing out free bottles of water, or subleasing their homes through Airbnb.
The rest of 2016 will be one giant ?beta? (outperformance) chase.
You can?t blame these guys for being scared. My late mentor, Morgan Stanley?s money management guru Barton Biggs, taught me that bull markets climb a never-ending wall of worry.
And what a wall it has been.
Worry has certainly been in abundance this year, what with China confusing at best, ISIS on the loose, Syria exploding, Iraq falling to pieces, the contentious presidential elections looming, oil in free fall again, the worst summer fires in decades, flaccid economic growth, and even a rampaging Donald Trump.
We also have to be concerned that my former Berkeley professor, Fed governor Janet Yellen, is going to unsheathe a giant sword and start hacking away at bond prices, as she has already done with quantitative easing (I?ve been watching Game of Thrones too much).
Let me give you a little personal insight here into the thinking of Janet Yellen. It?s all about the jobs. Any hints about rate rises have been head fakes, especially when they come from a small, anti QE Fed minority.
When in doubt, Janet is all about easy money, until proven otherwise. Until then, think lower rates for longer, even on the heels of the blockbuster 255,000 July nonfarm payroll.
So I think we have a nice set up here going into Q4. It could be a Q4 2015 lite-- a gain of 5% in a cloud of dust.
The sector leaders will be the usual suspects, big technology names, health care, and biotech (IBB). Banks (BAC), (JPM), (KBE) will get a steroid shot as the new value plays.
To add some spice to your portfolio (perhaps at the cost of some sleepless nights), you can dally in some big momentum names, like Tesla (TSLA), Netflix (NFLX), Lennar Housing (LEN), and Facebook (FB).
While we?re all sitting on our hands waiting for Janet Yellen to make her move, or non move, it is time to reminisce.
My friend was having a hard time finding someone to attend a reception who was knowledgeable about financial markets, White House intrigue, international politics, and nuclear weapons.
I asked who was coming. She said Reagan?s Treasury Secretary George Shultz, Clinton?s Defense Secretary William Perry, and Senate Armed Services Chairman Sam Nunn.
I said I?d be there wearing my darkest suit, cleanest shirt, and would be on my best behavior, to boot.
When I arrived at San Francisco?s Mark Hopkins Hotel, I was expecting the usual mob scene. I was shocked when I saw the three senior statesmen making small talk with their wives and a handful of others.
It was a rare opportunity to grill high level officials on a range of top secret issues that I would have killed for during my days as a journalist for The Economist magazine. I guess arms control is not exactly a hot button issue these days. I moved in for the kill.
I have known George Shultz for decades, back when he was the CEO of the San Francisco based heavy engineering company, Bechtel Corp in the 1970's. I saluted him as ?Captain Schultz?, his WWII Marine Corp rank, which has been our inside joke for years.
Since the Marine Corps didn?t know what to do with a PhD in economics from MIT, they put him in charge of an anti-aircraft unit in the South Pacific, as he already was familiar with ballistics, trajectories, and apogees.
I asked him why Reagan was so obsessed with Nicaragua, and if he really believed that if we didn?t fight them there, we would be fighting them in the streets of Los Angeles.
He replied that the socialist regime had granted the Soviets bases for listening posts that would be used to monitor US West Coast military movements in exchange for free arms supplies. Closing those bases was the true motivation for the entire Nicaragua policy.
To his credit, George was the only senior official to threaten resignation when he learned of the Iran-contra scandal.
I asked his reaction when he met Soviet premier Mikhail Gorbachev in Reykjavik in 1986 when he proposed total nuclear disarmament.
Shultz said he knew the breakthrough was coming because the KGB analyzed a Reagan speech in which he had made just such a proposal.
Reagan had in fact pursued this as a lifetime goal, wanting to return the world to the pre nuclear age he knew in the 1930?s, although he never mentioned this in any election campaign.
As a result of the Reykjavik Treaty, the number of nuclear warheads in the world has dropped from 70,000 to under 10,000. The Soviets then sold their excess plutonium to the US, which today generates 20% of the total US electric power generation.
Shultz argued that nuclear weapons were not all they were cracked up to be. Despite the US being armed to the teeth, they did nothing to stop the invasions of Korea, Hungary, Vietnam, Afghanistan, and Kuwait.
I had not met Bob Perry since the late nineties when I bumped into his delegation at Tokyo?s Okura Hotel during defense negotiations with the Japanese. He told me that the world was far closer to an accidental Armageddon than people realized.
Twice during his term as Defense Secretary he was awoken in the middle of the night by officers at the NORAD early warning system to be told that there were 200 nuclear missiles inbound from the Soviet Union.
He was given five minutes to recommend to the president to launch a counterstrike. Four minutes later, they called back to tell him that there were no missiles, that it was just a computer glitch.
When the US bombed Belgrade in 1999, Russian president, Boris Yeltsin, in a drunken rage, ordered a full-scale nuclear alert, which would have triggered an immediate American counter response. Fortunately, his generals ignored him.
Perry said the only reason that Israel hadn?t attacked Iran yet, was because the US was making aggressive efforts to collapse the economy there with its oil embargo.
Enlisting the aid of Russia and China was key, but difficult since Iran is a major weapons buyer from these two countries.
His argument was that the economic shock that a serious crisis would bring would damage their economies more than any benefits they could hope to gain from their existing Iranian trade.
I told Perry that I doubted Iran had the depth of engineering talent needed to run a full scale nuclear program of any substance.
He said that aid from North Korea and past contributions from the AQ Khan network in Pakistan had helped them address this shortfall.
Ever in search of the profitable trade, I asked Perry if there was an opportunity in nuclear plays, like the Market Vectors Uranium and Nuclear Energy ETF (NLR) and Cameco Corp. (CCR), that have been severely beaten down by the Fukushima nuclear disaster.
He said there definitely was. In fact, he personally was going to lead efforts to restart the moribund US nuclear industry. The key here is to promote 5th generation technology that uses small, modular designs, and alternative low risk fuels like thorium.
I had never met Senator Sam Nunn and had long been an antagonist, as he played a major role in ramping up the Vietnam War. Thanks to his efforts, the Air Force, at great expense, now has more C-130 Hercules transport planes that it could ever fly because they were assembled in his home state of Georgia. Still, I tried to be diplomatic.
Nunn believes that the most likely nuclear war will occur between India and Pakistan. Islamic terrorists are planning another attack on Mumbai. This time India will retaliate by invading Pakistan. The Pakistanis plan on wiping out this army by dropping an atomic bomb on their own territory, not expecting retaliation in kind.
But India will escalate and go nuclear too. Over 100 million would die from the initial exchange. But when you add in unforeseen factors, like the broader environmental effects and crop failures (CORN), (WEAT), (SOYB), (DBA), that number could rise to 1-2 billion. This could happen as early as 2016.
Nunn applauded current administration efforts to cripple the Iranian economy which has caused their currency to fall 50% in the past two years. The strategy should be continued, even if innocents are hurt.
He argued that further arms control talks with the Russians could be tough. They value these weapons more than we do, because that?s all they have left.
Nunn delivered a stunner in telling me that Warren Buffet had contributed $50 million of his own money to enhance security at nuclear power plants in emerging markets.
I hadn?t heard that.
As the event drew to a close, I returned to Secretary Shultz to grill him some more about the details of the Reykjavik conference held some 30 years ago. He responded with incredible detail about names, numbers, and negotiating postures.
I then asked him how old he was. He said he was 94. I responded ?I want to be like you when I grow up?. He answered that I was ?a promising young man?. It was the best 63th birthday gift I could have received.
Oops, Wrong Number
?Lower yields, for longer, and lingering. I don?t think we?re going to get to an end for some period of time. The money that has been pumped into the system is going to keep equities high.? said Mark Grant, managing director of Hilltop Securities.
Global Market Comments
August 8, 2016
Fiat Lux
Featured Trade:
(WHAT?S ON YOUR PLATE FOR THIS WEEK),
(FXY), (FXE), (FXB), (SPY),
(MAD OPTIONS TRADER KILLS IT WITH HIS FIRST WEEK),
?(SPX), (FB),
(TESTIMONIAL)
CurrencyShares Japanese Yen ETF (FXY)
CurrencyShares Euro ETF (FXE)
CurrencyShares British Pound Ster ETF (FXB)
SPDR S&P 500 ETF (SPY)
S&P 500 (^SPX)
Facebook, Inc. (FB)
The week will kick off further discounting the barnburner July Nonfarm Payroll Report, which reeled in a healthy 255,000 new jobs.
The economy has now added jobs for 70 consecutive months, the longest such streak in history.
I always use my two-day rule when it comes to this game changing data release. That?s how long it takes markets to fully discount it's impact.
I managed to nail the number position wise, betting on a pop in the US dollar with a short in the Japanese yen, which duly took place.
A healthy US economy will drive the Federal Reserve to raise interest rates sooner, making it more attractive as a store of value.
This is especially true against the negative interest rate currencies of the Euro (FXE), the Yen (FXY), and soon to be, the British Pound (FXB).
At least that?s how it will be perceived by traders for the first few days.
I also made a timely exit from my short position in the S&P 500 (SPY) earlier in the week, clocking a 9.43% profit in only two trading days. Stocks rocketed to new all time highs on the news.
It?s been a very good week.
It is hard to argue with the strength of the payroll report. The headline unemployment rate stayed at a full employment 4.9%, rendering last week?s grim GDP report utterly meaningless.
The May payroll report was revised up by 13,000, while June added 5,000 new jobs.
The big gains were seen in professional and business services (+70,000), health care (+43,000), and leisure and hospitality (+45,000).
A new feature of the jobs picture this year is that the government has finally started adding jobs, largely through the hiring of teachers to accommodate local population growth.
Once again, mining was the big loser (-6,000) because it includes the beleaguered oil industry.
After the fireworks of last week, the coming five days will be a yawn on the data front.
Don?t forget that we also have the Rio Olympics all week, which, combined with the summer vacation schedule, tends to suck volatility out of markets.
I can?t tell you how many ?Out of Office? messages I am getting these days.
By the way, the Volatility Index (VIX) is approaching new decade lows.
On August 9th at 6:00 AM EST we get the NFIB Small Business Optimism Index, which should show a modest improvement.
On Wednesday at 10:00 AM EST the Labor Department JOLTS report should show a decline in job openings, reflecting the red hot July nonfarm payroll report.
At 8:30 AM EST on Thursday, the Weekly Jobless Claims gives us a more immediate read on the employment situation.
The Baker Hughes rig count wraps up as usual on Friday at 1:00 EST. Will the uptrend continue?
It all provides a healthy backdrop for a ?BUY EVERYTHING? approach to investing for the rest of 2016. Expect stocks, bonds, gold, and the dollar all to continue to appreciate to new highs.
As long as the US offers the highest yielding stocks and bonds in the developed world, this will continue to be true.
Adjust your trading accordingly. We are setting up for a melt up for the ages.
Mad Options Trader, Matt Buckley, absolutely knocked the cover off the ball last week, bringing in a monster 8%? return for his followers with four separate trades.
Perfectly timed long positions in the S&P 500 (SPX) and Facebook (FB) did the trick.
Those expired today, and Matt will have a new batch of trades for followers on Monday morning, but only if you sign in. Please find the screenshots for his closed trades below.
Matt?s unique service focuses primarily on the weekly US equity options expirations, with the goal of making profits at all times.
The trading will take place in the S&P 500 (SPY), major industry ETF?s like the Financials Select Sector (XLF), and large capitalized single names, such as Facebook (FB), JP Morgan Chase & Co. (JPM), and Apple (AAPL).
Matt is my old friend and fellow comrade in arms of Top Gun Options, one of the best performing trade mentoring outfits in the industry.
Matt knows what he is talking about. An independent audit shows that he has racked up an incredible 53.03% performance, net of commissions and fees, so far in 2016, one of the most difficult years in trading history.
That works out to an average 7.92% a month, or an incredible 95.09% a year.
Matt, a native of New Jersey, joined the Navy straight out of college, and rose to become an F-18/A fighter pilot. He attended the famed Top Gun school in Coronado, California. During the second Iraq War, Matt flew 44 combat missions.
Matt left the service in 2006, and immediately entered the hedge fund industry. A rapid series of promotions eventually took him to Peak6 Investments, L.P., a prominent Chicago hedge fund.
There, he soaked up the most successful elements of technical market timing, fundamental name selection, risk control, and options trade execution.
These are the multiple skills that have enabled Matt to post such a blockbuster performance.
Matt, known to his friends by his old pilot handle of ?Whiz?, is an incredibly valuable addition to the Mad Hedge Fund Trader team. I have appointed him Head of Options Trading.
I have known for some time that fortunes were being made in the weekly options expirations, where stories of tenfold returns are not unheard of. It is a strategy that is perfectly suited to these highly volatile, uncertain times, with most options positions expiring within four days.
Matt allows us to fill that gap in our product offerings.
The Mad Options Trader provides essential support for the active trader and will include:
1) Instant Trade Alerts sent out at key technical levels, an average of one a day. Alerts will be sent out on the opening and closing of every position.
2) Weekly Market Strategy Webinars held every Monday afternoon at 1:00 PM EST to give you a head?s up on the week ahead.
3) A weekly Live Trading Room held every Tuesday from 9:00 to 11:00 AM EST to give followers active real time trading experience.
4) Specialized Training Webinars on how to best execute Matt?s trades.
What I love about Matt is that he eats his own cooking. Many of the Trade Alerts he recommends are executed in his own personal retirement account with real dollars.
To see how he has performed so far in 2016, please check out the daily chart below.
You will have an ample opportunity to measure The Mad Options Trader?s abilities starting August 1st.
That?s when all current paid subscribers for any product of the Mad Hedge Fund Trader start receiving the service for free for 30 days.
From September 1, The Mad Options Trader will be available as a $1,500 per year upgrade to The Diary of the Mad Hedge Fund Trader or Global Trading Dispatch, the core research and trade mentoring service of the Mad Hedge Fund Trader.
The price for both services together will be $4,500 a year.
So, use this opportunity wisely, and watch how the Mad Options Trader performs over the coming month, FOR FREE.
Good Luck and Good Trading,
John Thomas
Publisher and CEO of the Mad Hedge Fund Trader
Thank you for the call I received from your staff the other day, but I?m afraid I?m not going to be able to renew my subscription to the Mad Hedge Fund Trader.
There?s nothing I?d like to do more than renew. I truly enjoy your insights on the markets and a description of your many travels. I have been following you for years and it is really a great deal.
However, I am active duty Air Force and recently got a command job. That means I have to go off to the Air War College. I know you didn?t get that far in your service, but consider yourself lucky. I have to read 100 pages a day, and it is a major commitment of time. So I can?t give you the time you deserve.
I hope to re up at a later date.
Charlie
Lieutenant Colonel
US Air Force
Dell Rio, Texas
Note from John Thomas: Thank you for your service Charlie.
John Thomas Flying a 1943 Boeing B-17 Bomber Flying FortressGlobal Market Comments
August 5, 2016
Fiat Lux
Featured Trade:
(THE AMERICAN ONSHORING TREND IS ACCELERATING),
(GE), (TSLA),
(PLEASE USE MY FREE SEARCHABLE DATA BASE)
General Electric Company (GE)
Tesla Motors, Inc. (TSLA)