Every time I watch a Robin Williams comedy sketch, I still feels the pangs of a lost friend.
His mother lived directly next door to my family for many years. A petite widow in her late seventies, we often looked in on her, and invited her into our community social group.
More than once, I came home to find my late wife chatting with her in the living room over a cup of tea.
Robin, ever the dutiful son, thanked me on many occasions. He volunteered to appear at fundraisers at my kids? schools. Needless to say, he was a huge hit and brought in buckets of money.
To describe Robin as a giant in his industry would be an understatement. No one could match his stream of consciousness outpouring of originality.
I know some Disney people who worked with him on the Aladdin animated film where Robin played the genie, and he drove them nuts.
The script was just a starting point for him. You just turned him on, and it was all peripatetic improvisation after that. This forced the ultra controlling producers to draw the animation around his monologue, no easy trick.
When I attended the London premier of Aladdin, the audience sat with their jaws dropped, trying to decode cultural references that were being fired at them a dozen a minute.
It was safe to say that Robin fought a lifetime battle with drug addiction. He only got out of rehab last year for the umpteenth time.
His depression had to be severe. People who knew him well believe that his comedy evolved as a way of dealing with it. He used jokes as weapons to keep the demons at bay. Perhaps that is the price of true genius. In the end, it was probably genetic.
This has been reaffirmed by the many comedians I have met during my life, including Groucho Marx, Bob Hope, George Burns, Jay Leno, Chris Rock, and many others (I?m seeing Jay again this weekend at the Pebble Beach Concourse d?Elegance vintage car show).
Robin was a very wealthy man, at one point owning a $25 million mansion in San Francisco?s tony Pacifica district. He leaves behind a wife and three adult children.
He was at the peak of career, with another movie coming out at Christmas, A Night at the Museum III, and a sequel to Mrs. Doubtfire in the works.
These are not normally the circumstances where one takes his own life. One can only assume that to do what he did he had to be suffering immense pain.
He will be missed.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/08/Robin-Williams.jpg402302Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-23 01:05:482015-07-23 01:05:48A Sad Farewell to Robin Williams
My friend, Texan money manager Mike Robertson, asked me the other day if there was one asset class that I truly despised.
I didn?t hesitate: bonds.
In fact, fixed income investments are about to regain the nickname they earned during the 1980?s: ?certificates of wealth confiscation.?
That leaves me within a hair?s breadth of pulling the trigger on some new short positions in fixed income instruments. My hedge fund buddies are lining up varies short plays here, like clay ducks in a shooting match.
With the ten year Treasury bond yield at a microscopic 2.30%, and 3.06% for the 30 year, you have a classic ?heads I win, tales, you lose? trade. Best case, you break even over the next decade. Worst case, you lose half or more of your capital.
The US has no history of excessive debt, except during WWII, when it briefly exceeded 100% of GDP. That abruptly changed in 2001, when George W. Bush took office.
In short order, the new president implemented massive tax cuts, provided expanded Medicare benefits for seniors, and launched two wars, causing budgets deficits to explode at the fastest rate in history.
To accomplish this, strict 'pay as you go' rules enforced by the previous Clinton administration, were scrapped. The net net was to double the national debt to $10.5 trillion in a mere eight years.
Another $5 trillion in Keynesian reflationary deficit spending by President Obama since then has taken matters from bad to worse.
This year, the national debt just nudged past our GDP at $17 trillion. The Congressional Budget Office is now forecasting that, with the current spending trajectory, total debt will reach $23 trillion by 2020, or some 160% of today's GDP, 1.6 times the WWII peak.
By then, the Treasury will have to pay a staggering $5 trillion a year just to roll over maturing debt. What's more, these figures greatly understate the severity of the problem.
They do not include another $9 trillion in debts guaranteed by the federal government, such as bonds issued by home mortgage providers, Fannie Mae and Freddie Mac. State and local governments owe another $3 trillion. Double interest rates, which they inevitably will, and our debt service burden doubles as well.
It is unlikely that the warring parties in Congress will kiss and make up anytime soon. It is therefore likely that the capital markets will emerge as the sole source of any fiscal discipline, with the return of the bond vigilantes.
They have already made their predatory presence known in the profligate nations of Europe, and they are expected to arrive here eventually.
Such forces have not been at play in Washington since the early 1980's, when bond yields reached 13%, and homeowners (including me) paid 18% for mortgages.
Since foreign investors hold 50% of our debt, policy responses will not be dictated by the US, but by the Mandarins in Beijing and Tokyo. They could enforce a cut back in defense spending from the current annual $700 billion.
Personally, I think the US will never recover from the debt explosions engineered by Bush and by 'deficits don't count' Vice President Chaney. The outcome has permanently lowered standards of living for middle class Americans and reduced influence on the global stage.
But I'm not going to get mad, I'm going to get even. I am going to make a killing profiting from the coming collapse of the US Treasury market through buying the leveraged short Treasury bond ETF, the (TBT).
I am sticking to my short term forecast for this fund to rise from the current $58 to $100, then $150. And that is despite a hefty and rising cost of carry of nearly 0.5% a month.
Where?s My Social Security?
00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-23 01:04:262015-07-23 01:04:26The Case Against Treasury Bonds
Featured Trade: (WHY DAX IS THE NEW LEAD CONTRACT), (DAX), (SPY), (AAPL), (FXY), (YCS), (GLD), (QQQ), (WHO SAYS THERE AREN?T ANY JOBS?), (TESTIMONIAL)
German Dax (EOD) DEUT ($DAX) SPDR S&P 500 ETF (SPY) Apple Inc. (AAPL) CurrencyShares Japanese Yen ETF (FXY) ProShares UltraShort Yen (YCS) SPDR Gold Shares (GLD) PowerShares QQQ Trust, Series 1 (QQQ)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-20 01:06:182015-07-20 01:06:18July 20, 2015
I am writing this to you from the back seat of a Toyota Land Cruiser as it winds its way over the legendary Tizi n?Tichka Pass crossing the High Atlas Mountains of Morocco.
I am fleeing the blistering 110-degree heat of the Sahara Desert on the way to the fabled thousand-year-old city of Marrakesh.
I am typing so I don?t have to endure the suspense of seeing how my driver is going to pass the lumbering truck in front of us. We have already seen one bus that has run off a cliff.
I have always been a believer of the ?lead contract? concept for trading global markets.
It always seems that traders can focus on only one market at a time. Get it right, and trading anything else is a piece of cake, a simple second or third derivative trade.
I have seen many lead contracts over the decades. During the 1970?s, everything traded tick for tick with gold (GLD). After that, oil (USO) was the main driver. During the 1990?s NASDAQ (QQQ) was the big kahuna.
Right now, the lead contract for all markets high and low is the DAX, the German stock index. Keeping a laser like focus on the DAX has enabled me to clock a 30% return for my followers so far this year, with many making much more.
It has given me such an advantage that I have even been able to phone in winning Trade Alerts from the back of a camel.
(Last year, when the Euro (FXE) was the lead contract, the Trade Alerts were sent while holding on to a rope on the face of a cliff in the Swiss Alps).
In years past, when trading floors were occupied by actual humans, one could physically feel when the herd got the scent, and all piled into the same securities at the same time, chasing the same prey.
Those days have long since passed, the traders replaced by whirring and blinking machines.
No doubt, much of this is now algorithmically driven. It only takes a news flash here, and a parallel instrument to move there, and billions of dollars pour into or out of the DAX.
Thursday, July 8, was a perfect example of how useful knowledge of the lead contract?s identity can be. The Dow Average broke its 200-day moving average months ago.
The S&P 500 (SPY) has been churning around its 200-day for weeks. But without confirmation from the DAX these moves were mere corrections within a broader long-term uptrend.
So last Thursday, when the DAX finally hit its 200-day and bounced hard, I knew the global markets were ready for a tradable rally.
The lead contract has the ability to predict the future as well. By rallying right when it did, the DAX predicted the following:
1) Europe would agree to a grand restructuring of Greek debt.
2) Iran would sign a deal with the leading powers to limit its nuclear program.
3) The emergency measures taken by the Chinese government to halt the collapse of the Chinese stock markets would succeed.
As it turns out, all three of these events unfolded, within days. Of course, I have been predicting these outcomes for months, or years. But you have to read my newsletter to know that.
So, what is the lead contract telling us will happen next?
All of the big volatility events of 2015 are now behind us. As the summer grinds on, and as the developed world finishes its summer vacations, several more attempts will be made to break the DAX 200 day moving average.
They will all fail.
That then sets up a pretty rosy picture for the rest of the year. The Greek deal will boost European GDP, especially Greece?s. The Iran agreement has already brought significantly lower oil prices, increasing growth for the world as a whole.
US economic data should soon begin to deliver a convincing turn to the upside. That paves the way for a global ?RISK ON? move.
This is why I bought the S&P 500 (SPY), Apple (AAPL), and sold short the Japanese yen (FXY), (YCS), right exactly when the lead contract, the DAX, told me to do so.
Well, I am finally coming out of the Atlas Mountains now, after passing through some extraordinary scenery. Bright red stone faces, verdant green riverbeds, mud brown medieval villages. The temperature has plunged to only 100.
Prickly pear is everywhere, providing a rich harvest of fruit for the residents, and even the century plants are blooming.
It looks like I?ll live to send out another Trade Alert.
Your Newsletter Will Be With You Shortly
https://www.madhedgefundtrader.com/wp-content/uploads/2015/07/Road-Signs-Morocco-e1437063528849.jpg357400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-20 01:05:552015-07-20 01:05:55Why DAX is the New Lead Contract
Featured Trade: (JULY 22 GLOBAL STRATEGY WEBINAR), (THE GLOBAL CONSEQUENCES OF THE CHINESE STOCK COLLAPSE), (FXI), (FCX), (GLD), (SLV), ?(PALL), (FXA), (TLT) (THOUGHTS AT SEA ABOARD THE QE2-PART II)
iShares China Large-Cap (FXI) Freeport-McMoRan Inc. (FCX) SPDR Gold Shares (GLD) iShares Silver Trust (SLV) ETFS Physical Palladium (PALL) CurrencyShares Australian Dollar ETF (FXA) iShares 20+ Year Treasury Bond (TLT)
https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png00Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-17 01:06:532015-07-17 01:06:53July 17, 2015
I am writing this to you from the Historic El Minza Hotel in Tangiers, Morocco. I am overlooking the ancient medina from my top floor suite, which was once occupied by Sir Winston Churchill. When I first arrived, I thought the swirl of his cigar smoke still lingered in the air.
There is a brisk wind crossing the Straights, thankfully cooling my room, and in the distant mists, the Rock of Gibraltar looms.
When a butterfly flaps its wings in the Brazilian rainforest, a tsunami pounds Japan. That is one of a potentially infinite numbers of outcomes predicted by Chaos Theory.
The upshot for our rapidly interconnecting economic and financial world is a runaway bull market in unintended consequences. Only this time, the proverbial butterfly has been working overtime in the Chinese equity markets.
The Chinese GDP growth rate peaked at 13% in 2011, and has been falling ever since, most recently down to the 7% level. The Shanghai stock market followed by giving up its growth premium, the index falling from 5,000 to 1,800. It then spent years bouncing around just over the 2,000 level.
About a year ago, Hong Kong based taipan friends of mine started enthusiastically predicting the onset of another great Chinese bull market. The government, it was said, would be stoking the fires to distract the public from an assortment of scandals besetting the central government.
They were wildly successful.
In November, they added fuel to the fire by permitting unrestricted foreign purchases of Chinese shares for the first time.
In less than a year, the Shanghai Index rocketed from 2,000 to 5,000, becoming the world?s top performing stock market. A frenzy ensued.
To get some local color on the trading there, I called no further than my son John, soon to be 30. By day he teaches English at a government university in Hangzhou. By night, he trades global assets in his own personal hedge fund.
Remember, this is the family where the kids used to discuss risk control, implied volatilities, and options pricing models over the dinner table (to the eternal puzzlement of Mom). My children learned their alphas, betas, and deltas right after their A, B, C?s.
John told me months ago that the bubble had nothing to do with investment, that it was all pure gambling, and that Shanghai had turned into a giant casino. Brokerages were besieged by massive crowds, transfixed by the blinking lights of stock tickers, betting their life savings.
Millions of punters had abandoned day jobs to play the stock market full time. Some shares rose 10% every day for two months! It could only end in tears.
And so it did, big time.
I have been through many crashes during my long and tortured life. But I have to say that this year?s Shanghai one has really impressed me. The index gave up 40% in less than a month, wiping out $3.25 trillion in paper wealth. Some individuals lost more than $100 billion in weeks. No typo here.
The problem is that this instant evaporation of wealth is not just China?s, but ours, as well.
For a start, the Chinese were selling gold (GLD) on the way up to finance new stock purchases. On the way down, they are selling what gold they have left to meet margin calls.
Thus, the barbarous relic has suffered an awful year, during conditions of closing banks and failing brokers that are normally ideal for it.
It turns out that individuals have been posting a lot of other things to collateralize leveraged stock holding, like bars of copper (CU). Because of the lack of a consumer lending system, Chinese buy copper bars and use them to backstop a whole host of purchases.
When stocks crashed, copper did so as well, as brokers dumped their collateral. That led to the biggest one-day drop in the red metal in nearly a decade, nearly 10%.
That dive spilled over into other base metals like nickel, zinc, and palladium (PALL). The Australian dollar (FXA) took it on the nose in turn, as it is a major exporter of these metals.
This would normally be taken as a leading indicator of a global recession. No more. Don?t get yourself confused, misreading the meaning of price moves like these. The global economy is, in fact, expanding, thanks to the Greek and Iranian nukes deals.
That is bad news for economic prognosticators like me, but great news for the world?s largest consumers of palladium, the US car industry.
There were also consequences from the Shanghai stock collapse to be faced in US capital markets. Whenever margin clerks see trouble anywhere in the world, they tend to tighten up their own books.
Call it the ?whistling past the graveyard? effect. That means tighter terms and higher interest rates for margin debt for you and me. Wonder why you, as an individual, can?t short naked puts in size? This is why.
There is also a concomitant rise in US Treasury bond (TLT) prices, and fall in yields, which we have already seen.
I could go on and on with permutations of the interconnection of asset classes around the world. It really is a kind of game for me, which I have been playing for nearly a half century (the Polish Zloty? The price of camels in Morocco?).
It all goes to prove a point that I never fail to make in my many strategy luncheons and speaking engagements.
We are all global diversified investors, whether we realize it or not.
Your Newsletter Will Be With You Shortly
https://www.madhedgefundtrader.com/wp-content/uploads/2015/07/Cyber-Cafe-e1437059708116.jpg400298Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-17 01:04:032015-07-17 01:04:03The Global Consequences of the Chinese Stock Market Crash
48 degrees, 02.12 minutes North, 043 degrees, 42.08 minutes West, or 1,000 miles south of Greenland.
When I visited the computer center, I was stunned to learn that they were offering three hour long classes on Apple products and programs every hour, all day long.
They covered iMacs, iPads, IPods, IPhones, and all of the associated software and gizmos. I promptly signed up for five classes. Watch for my next webinar. It will be a real humdinger, with all the bells and whistles.
Poor (RIMM) is already dead, and they don?t even know it yet.
You would think that with 280 pounds of luggage I could remember to bring a pair of black socks. It was not to be. So I headed out to the ballroom with my black tux and navy blue socks to tango, rhumba, and foxtrot with the best of them, hopelessy color uncoordinated.
The problem is that just as you twirl, the ship rolls, swiping the dance floor right out from under you. With several Octogenarian couples within range, and my size, the consequences could have been fatal. Still, those oldsters really knew their steps. I really hope those pictures come out, especially the one of me on the dance floor, flat on my back.
Looking at the vast expanse of the sea outside my cabin window, I am reminded of the opening scenes of the 1950?s WWII documentary, Victory at Sea. An endless, dark, tempestuous ocean churns and boils relentlessly.
I am now even more awed by my early ancestors, who took three months to cross from Falmouth to Boston in 1630 in a 50-foot long wooden ship called the Pied Cow. They did this without navigation to speak of, rotten food, and a dreaded fear of sea monsters. What courage, or religious ferocity, must have driven them.
Your Intrepid Reporter
Breakfast on the High Seas
Check Out My New Digs
https://www.madhedgefundtrader.com/wp-content/uploads/2013/07/John-Thomas-computer.jpg370486Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-17 01:03:042015-07-17 01:03:04Mid Atlantic Thoughts Aboard the Queen Mary 2, Part II
?Take 200 round trips to Australia, and you really start to rack up the miles,? said Tom Stoker an automotive sales analyst who just surpassed 10 million frequent flier points on United Airlines. It makes my own 1 million miles seem puny by comparison.
?
https://www.madhedgefundtrader.com/wp-content/uploads/2012/06/united.jpg200250Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2015-07-17 01:02:092015-07-17 01:02:09July 17, 2015 - Quote of the Day
Legal Disclaimer
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
