Newsletter Archives

Why US Stocks Could Rise 50% Higher

When things are going to happen, and the market gets a whiff of it, fast forward often kicks in.

That seems to be what is happening to my forecast that US stocks would end 2016 on the back of both rising earnings and a price earnings multiple expansion.

Hey Mr. Market! Check your watch! You?re three months early!

Earnings are growing modestly, as I expected. But multiple expansion has taken off like a rocket and is approaching the highs not seen since the 2000 dotcom bubble top.

S&P 500 earnings multiple are about to approach the 20X line, and 21X beckons.

How high will multiples rise in this cycle? The old previous high of 26X seems like a chip shot.

However, we now live in a brave new world.

Is a 30X multiple possible? That would require the stock market to rise by 50% on current earnings, and much more if they start to reaccelerate as well, which seems to be happening now.

This could take the Dow Average up to an eye popping 27,000, and the S&P 500 (SPX) to a scorching 3,227.

But wait! There?s more!

If earnings and multiples BOTH rise 50% each, as we enter the 2020?s, that boosts the Dow Average up to a fanciful 40,000, and the S&P 500 (SPX) to an unbelievable 4,837.

Is anyone ready to sit down and have a stiff drink yet? I recommend the Jameson 12 year old, neat. A bottle will do.

I have been predicting these levels for years. I just didn?t think they would appear so quickly.

There is no shortage of reasons for the current, out-of-the-blue stock melt up.

The negative interest rates that now afflict the bulk of the world?s bond markets are a major cause.

These are the result of global central banks absolutely flooding the world?s financial markets with liquidity.

A surprise Brexit vote put a turbo-charger on this trend from which ultra high bond prices are yet to retreat.

The harsh reality that the bond bears fail to face is that there is a global bond SHORTAGE!

This is why the 30-year US Treasury bond with a 2.20% yield is well below the average stock dividend yield of 2.5%.

Record high bonds prices suddenly made stocks look cheap, not just in the US, but globally.

And guess what? Everyone was underweight stocks, and increasingly so.

Every crisis of the past year panicked investors into dumping stocks at market lows, be it the prospect of a Chinese economic collapse, a Donald Trump presidency, or Britain leaving the EC.

None of these things happened (Brexit will get undone), so stocks quickly snapped back every time.

This is why cash levels are at multi-decade peaks, and we are all underweight stocks, in a market that is appreciating to new all time highs daily.

Once again, buying stocks AND bonds on every dip for the past seven year now looks like a stroke of genius.

I hate to say ?I told you so,? but I told you so.

I have been making exactly this kind of widely ridiculed and disbelieved prediction since I originally posted my ?Second American Industrial Revolution? research piece on July 23, 2014 (click here). The later revision is available here.

Dow 100,000 anyone? If you don?t like that, how about Dow 200,000?

None other than long term Mad Hedge subscriber Warren Buffet has opined that if interest rates go to ultra-low levels and stay there for years, stock prices could rise TEN TIMES from here.

This is why every new subscriber to the Diary of a Mad Hedge Fund Trader immediately receives my opus on ?10 Reasons Why US Stocks Are Dirt Cheap? (click here).

And I penned that prediction way back when the (SPY) PE multiple was still at a lowly 16X.

Why can?t you find such ambitious forecasts elsewhere? I am told that being negative sells more newsletters, and being hugely negative sells millions of them.

Just thought you?d like to know.

Thoughts at Sea Aboard the Queen Mary 2, Part III

Diary, Newsletter

50 degrees, 26.68 minutes North, 022 degrees, 29.98 minutes West, or 1,000 nautical miles South of Iceland, heading 089 degrees.

Four days of hearing foghorns is starting to get tiring. Captain Wells has been ducking many of his social responsibilities, feeling more secure in the bridge close to the radar.

After a few days of intermittent access, the internet is now gone for good, the satellite connection having given up the ghost.

People are blaming everything from a lightening strike on the Virginia ground station to late night watching of porn by the crew.

Instead of surfing the web, I am devoting more time to exercise in anticipation of my upcoming Swiss mountain climbing adventures.

I have developed a careful routine where I fast walk three times around deck 7 in a brisk wind, take the elevator down to deck 1, walk up their stairs to deck 13, speed past the kennels, the practice golf range, two swimming pools and a bar.

I can accomplish all of this three times in an hour, and do it with 40 pounds of books stashed in my backpack.

My butler, Peter, tells me there is always a certifiable nut case on every cruise, and I have been designated by the crew as ?THE ONE?.

The 2,600 passengers are quite a mixed batch. We have 1,200 British, 750 Americans, 350 Germans, 80 Canadians, 4 dogs, three cats, and an assortment of other nationalities, and exactly one Japanese couple who don?t speak a word of English.

I took pity on them and spent an evening translating and catching up on the world at large with them. He was a retired dance instructor, which explains why he and his wife owned the dance floor on most nights.

They were grateful for the conversation, for during their entire 30 day cruise from New York to Southampton, then the Baltic Sea and the Norwegian fiords, then back to New York, they had no one to speak to. Still, that was better than last year, when they completed a 105-day round the world cruise with no one to talk to.

Before they left, they gave me an exquisite, hand made, traditional Japanese purse as a gift.

All those hours on the Tokyo subway memorizing flash cards finally paid off!

The Hard Life at Sea

Breakfast on the High Seas

Your Intrepid Reporter

July 15, 2016 - Quote of the Day

Diary, Newsletter, Quote of the Day

?This is an epic bond bubble that we may have just seen the end of, not only here, but in Europe too,? said Peter Boockvar, an analyst at the Lindsey Group.

July 14, 2016

Diary, Newsletter, Summary

Global Market Comments
July 14, 2016
Fiat Lux

Featured Trade:
(JULY 27 BASEL, SWITZERLAND GLOBAL STRATEGY LUNCHEON)
(WELCOME TO GLOBAL TRADING DISPATCH),
(WHY I HAVE BECOME SO BORING),
(SPY), (QQQ), (IWM), (AAPL), (TSLA), (BIDU), (LNG)

SPY SPDR S&P 500 ETF Trust
QQQ PowerShares QQQ Trust
IWM? iShares Russell 2000 ETF
AAPL Apple Inc.
TSLA Tesla Motors, Inc.
BIDU Baidu, Inc.
LNG Cheniere Energy, Inc.

Welcome To Global Trading Dispatch

Diary, Newsletter

Congratulations on your subscription to Global Trading Dispatch, the flagship publication of The Mad Hedge Fund Trader.

You have just made the best investment decision of your life.

You can now take my 50 years of trading and investment experience and add it to your own, without having to endure my half-century of blood, sweat, and tears.

To get the most out of the service as quickly as possible I have a few tips for the nimble, as well as the wise.

The sooner you grasp the many aspects of our service, the quicker you can start making money in your trading account. And there is nothing I?d like to see more than that.

For a start, please write down your user ID and password where you can easily find them. You can?t access any of the advanced services you paid for without them.

Nancy, in Customer Support, develops a nervous tick at the fifth daily request for a lost password, and starts foaming at the mouth at the tenth.

It would be a good idea for you to visit the FAQ page and read the answers to our most frequently asked questions.

You should have already received two emails inviting you to opt in to The Mad Hedge Fund Trader mailing lists. This assures you will receive my daily research newsletter and trade alerts on a timely basis. Please click on the links provided within BOTH emails.? They were sent from newsletter@madhedgefundtrader.com and alert@madhedgefundtrader.com

Special Note: Unlike most other trading newsletters, we WILL NOT sell your email address to third party marketers. We hate it when this happens to us, and you probably do as well.

Once you are logged in, cruise around our website. You will be pleasantly surprised. Click on each tab on the home page and drop down menus will appear.

If you plan on trading, you will want to sign up for our free Text Alert Service to assure instantaneous receipt of my trading recommendations.

To request to receive text alerts, login to the website and go to Update My Profile and click the box ?Yes, I want to receive text alerts!?, then enter your mobile number below the formatting instructions.? Note there are two places where your phone number can be entered.? If you want texts you also have to enter your number in the second area as well.? The list is updated each Thursday.

For those of you new to options trading, we have training videos available to help you get started. To view the videos hover on the GLOBAL TRADING DISPATCH tab, click on Learn to Trade then click on the video you want to watch.

To see the positions we currently hold in our Model Trading Portfolio, hover on the GLOBAL TRADING DISPATCH tab, then click on CURRENT POSITIONS in the drop down menu, then click on the blue hyperlink to download an excel spreadsheet.?

Also on the spreadsheet is the entire history of the Trade Alert Service since it was started in December, 2010.

As part of your subscription you are invited to attend my live biweekly Global Strategy Webinars. That?s where I give the current state of play in all asset classes, looking for the best opportunities to buy or go short.

An email will be sent to you with a link to register for the webinar.? Reminder emails are sent days, and then hours, in advance of the webinar.

Once the live webinar begins, a chat window will appear in which you can submit your own questions. I?ll get to as many as I can.

To view the most recently recorded Global Strategy Webinars, please hover on the?GLOBAL TRADING DISPATCH tab, then WEBINARS-CURRENT YEAR in the drop down menu, and then click the PLAY button for the desired webinar.

You are also free to search the data base by date or topic for any company name, investment, or asset class you desire. Just click on either of the search boxes in the lower right corner of the home page and enter your search term.

The site will scan? the eight million words I have written over the past decade, and post the relevant research piece(s) in reverse chronological order.

That is 13 times the length of Tolstoy?s War and Peace. But then I had the benefit of Word for Windows to speed things up, while the 19^th century Russian writer was limited by a quill and ink.

Finally, if you have any other questions about Global Trading Dispatch, or any of? the other Mad Hedge Fund Trader products, please don?t hesitate to call Nancy in Customer Support in Florida at (888) 716-1115. She will bend over backwards to help you and can work miracles.

Good Luck and Good Trading,

John Thomas
The Mad Hedge Fund Trader

The Roads to Profits Are Many

As Are the Rewards

July 14, 2016 - Quote of the Day

Diary, Newsletter, Quote of the Day

?Sure, things are crazy now, but they can remain crazy for a little bit longer,? said a hedge fund trader friend of mine.

July 13, 2016

Diary, Newsletter, Summary

Global Market Comments
July 13, 2016
Fiat Lux

Featured Trade:
(JULY 22 ZERMATT, SWITZERLAND GLOBAL STRATEGY SEMINAR),
(FLYING WITH SIR RICHARD BRANSON),
(THE MYSTERY OF THE BRASHER DOUBLOON)

Flying with Sir Richard Branson

Diary, Newsletter

As I boarded a Virgin Atlantic 747 to fly from New York to London a few weeks ago, who did I find in the seat next to me, but my old friend, Sir Richard Branson.

I first got to know the shaggy haired billionaire entrepreneur 36 years ago in London. I lived in a Georgian mansion I had lovingly restored in London?s Little Venice district, and he lived in a historic canal boat next door. The traffic in and out of his floating home was constant and never ending.

This was during his adventurer period, when he set a new record for crossing the Atlantic in a speedboat, and then repeated the feat in a high altitude balloon. He almost made it, crashing into the sea just west of Scotland.

It was about this time that he was traveling from Puerto Rico to the Virgin Islands to visit a new girlfriend. American Airlines cancelled the flight because there were not enough passengers.

So the ever enterprising Richard took up a collection among the grounded passengers and chartered a plane of his own, flying them all to his destination.

He knew he had had stumbled on the kernel of an idea. He spent the next day checking out lease rates for used 747?s.

A few months and a couple of government subsidies later, and the Virgin Atlantic Airways was born, pursuing a discount priced, premium service business model that has proven wildly successful.

I always fly Virgin, including the Atlantic, America, and Australia derivations.

British Airways did everything it could to put him out of business. It launched a fierce ?dirty tricks? campaign that included calling Virgin customers and telling them their flight was cancelled, and deliberately losing transferred luggage.

BA got busted, and ended up paying Virgin millions in damages. Some 33 years later, 18 Trans Atlantic competitors have gone bankrupt, while Virgin Atlantic prospers.

Once we were flying to Moscow together, he on one of his endless promotions (I think he drove a tank across Red Square), and me on some undisclosed government business (we won). He then asked me if I would like to land the plane going into Sheremetyevo Airport.

I said ?Sure.?

Flying into Moscow during the Cold War was a big deal, a logbook entry to be envied by other pilots and flight examiners alike.

So Richard escorted me into the cockpit and said, ?My friend, Captain Thomas, will be taking it in from here.? Without saying a word, the copilot stood up and I took the right hand seat. They knew the drill.

That was pure Richard, gracious all the way.

It wasn?t long after that that Richard almost killed himself bungee jumping off the top of a hotel in Las Vegas in a 50-knot wind. Then, his family finally asked him to take it easy.

I have the same problem.

These days I often bump into Sir Richard on the lecture circuit. I instruct the audience about how to make money in the stock market, as is my way. Richard then enthralls them on how to spend it.

We make a great team, although the ladies at the following receptions always seem far more interested in him than in me.

I wonder why?

Richard suffered a rare setback a couple of years ago when his Virgin Enterprise space ship crashed on a test flight while approaching 1.4 times the speed of sound, killing the pilot. He spent a day of soul searching with his team of 400 engineers, trying to gauge whether this was a fool?s errand.

In the end, he decided to continue on. Space is dangerous, and sometimes people die, but that is no reason to quit. His goal is to turn the project into a global airline that can take passengers from San Francisco to Australia in minutes, and ferry guests to his hotels in space.

Some 800 customers have already made $80 million in deposits on the inaugural space flight, joining the 500 who have already made it there since 1959.

Richard doesn?t think small.

He has suffered from dyslexia throughout his life, struggling to accomplish simple tasks that others do with ease. I have seen this before, a disability that supercharges people to overcome it, which they overshoot to accomplish great things.

To this day, he confesses to not having the slightest idea of how a balance sheet or income statement works. That?s quite a confession coming from a man who runs a global multibillion dollar empire. He was always the marketing guy, never the numbers man.

But he has a vague idea. One of his board members once drew a picture of fish being captured by a net in the sea. The water passing through the net was the gross sales, he explained, while the fish were the profit. He got it instantly.

Putting in an all nighter over brandy over the Atlantic discussing the important affairs of the world, Sir Richard and I arrived at Heathrow the next morning, somewhat the worse for wear.

He was met by an admiring staff, who whisked him off to a waiting Daimler limousine. I trudged off to customs and the Paddington Express.

?Next year,? I thought, ?Maybe next year.?

The Mystery of the Brasher Doubloon

Diary, Free Research, Newsletter

I?ll never forget when my friend, Don Kagin, one of the world?s top dealers in rare coins, walked into the gym one day and announced that he made $1 million that morning.? I enquired ?How is that, pray tell??

He told me that he was an investor and technical consultant to a venture hoping to discover the long lost USS Central America, which sunk in a storm off the Atlantic Coast in 1857, heavily laden with gold from the new state of California.

He just received an excited call that the wreck had been found in deep water off the US east coast.

I learned the other day that Don had scored another bonanza in the rare coins business. He had sold his 1787 Brasher Doubloon for $7.4 million. The price was slightly short of the $7.6 million that a 1933 American $20 gold eagle sold for in 2002.

The Brasher $15 doubloon has long been considered the rarest coin in the United States. Ephraim Brasher, a New York City neighbor of George Washington, was hired to mint the first dollar denominated coins issued by the new republic.

Treasury secretary Alexander Hamilton was so impressed with his work that he appointed Brasher as the official American assayer.

The coin is now so famous that it is featured in a Raymond Chandler novel where the tough private detective, Philip Marlowe, attempts to recover the stolen coin.

The book was made into a 1947 movie, ?The Brasher Doubloon,? starring George Montgomery.

This is not the first time that Don has had a profitable experience with this numismatic treasure. He originally bought it in 1989 for under $1 million, and has made several round trips since then.

The real mystery is who bought it last? Don wouldn?t say, only hinting that it was a big New York hedge fund manager who adores the barbarous relic. He hopes the coin will eventually be placed in a public museum.

Who says the rich aren?t getting richer?

July 13, 2016 - Quote of the Day

Diary, Newsletter, Quote of the Day

?They are energetic. They are very smart. But a lot of them?they are paper pushers. They make a fortune. They pay no tax. It?s ridiculous, OK?? said presidential candidate, Donald Trump.