Global Market Comments
October 24, 2013
Fiat Lux
Featured Trade:
(THE CASE AGAINST TREASURY BONDS), (TBT), (TLT),
(MY PERSONAL LEADING ECONMIC INDICATOR),
(HMC), (NSANY), (DXJ)
(A FILM REVIEW OF ?MARGIN CALL?)
ProShares UltraShort 20+ Year Treasury (TBT)
iShares 20+ Year Treasury Bond ETF (TLT)
Honda Motor Co., Ltd. (HMC)
Nissan Motor Co. Ltd. (NSANY)
WisdomTree Japan Hedged Equity (DXJ)
Now it?s time for some cultural edification. I first became aware of ?Margin Call? as a pre-production project four years ago when news leaked out that the principal actors, Kevin Stacey, Demi Moore, Stanley Tucci, and Jeremy Irons, were reading The Diary of a Mad Hedge Fund Trader to learn about the industry and get in character.
The plot covers a 24-hour period on the eve of the 2008 financial crisis at a fictitious Wall Street house obviously modeled on Lehman Brothers. A strategic downsizing sacks the firm?s risk manager, Stanley Tucci, who casually mentions to a young associate as he carries his cardboard box down the elevator that the firm is on the verge of getting wiped out in the subprime securities market.
A series of emergency, all night meetings ensue. At the last minute, the CEO, John Tuld, not to be confused with Lehman?s Dick Fuld, alights, godlike, on the roof in a helicopter, obviously clueless about what has been going on in his firm, and the securities involved. The decision is made to dump their entire position at a huge loss at the market opening, even if it means causing the failure of many of the firm?s clients and counterparties.
When the sales staff rebel, they are offered extra million dollar bonuses if the positions are gone by noon. On orgy of predatory salesmanship ensues, which I have seen myself on trading floors a thousand times. In an hour, prices for some bonds drop 40%. The firm lives on to fight another day, but only at the cost of wiping out reputations and ending careers. The CEO has a laugh and flies away.
Those in the business will uncomfortably recognize many of the hard hearted practices, half-truths, and ethical lapses endemic on Wall Street. It really is only about making money and survival of the fittest.
Despite being a total flop at the box office on a limited release, the acting is incredible. The movie is still showing on some long distance, intercontinental flights. So if you have some free time, order the DVD on Netflix (but don?t touch the stock!).
And hey, Kevin baby, have your people call my people and let?s do lunch when I?m in Beverly Hills in January!
?Washington is a city of Southern efficiency and Northern charm,? said the late President John F. Kennedy.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.
Global Market Comments
October 23, 2013
Fiat Lux
Featured Trade:
(THE WORST IS YET TO COME), (SPY),
(MY OLD PAL, LEONARDO FIBONACCI),
(TESTIMONIAL)
SPDR S&P 500 (SPY)
I was not surprised to see the belated September nonfarm payroll come in at a miserable 148,000. It clearly shows that companies were already hunkering down with their overheads in the run-up to the recent DC slugfest. The figure had been delayed by the Washington shutdown, which froze all government data releases.
In fact, the job market is weaker than even this number suggests because it includes the one time only addition of hundreds of thousands of part time teachers who went back to work for the new school year.
I think that this will be only the first of many data releases showing that the economy completely fell off a cliff in October. I have received emails from readers all over the country supplying a treasure trove of anecdotal evidence of how bad conditions got. It sounds like business came to a complete standstill in the metro Washington DC area.
If November comes and we suddenly get a whole raft of bad October numbers at once, the talking heads who drive the short term market will go into a tizzy. They?ll predict that the bull market is over, that we are going into a long awaited recession, and that it is time to dump all your stocks. A forecast of ?Dow 3,000? will once again show its ugly face. The net net of all this will likely be a 4.7% or 8% correction in the S&P 500 of the sort I discussed yesterday.
Take the gift.
That?s when you want to jump in with both feet. Because, after the politically induced October hiccup, the economy will roar once again.
The outlook for 2014 is looking mighty damn fine. For the first time in many years, we will be looking at a global synchronized recovery, with the US, Europe, China, and Japan all delivering multi year highs in GDP growth at once. The fiscal drag emanating from falling government spending will be the lowest in years. Corporate profits everywhere will soar.
The taper, the reduction of the Federal Reserve?s $85 billion a month in bond buying, is now not slated to start until June. It may not happen at all in 2014 if the jobless rate falls insufficiently and the ruckus in Washington continues. The Fed has clearly concluded that in order to prevent the US from falling back into recession it must continue to pump money into the economy as long as the gridlock lasts.
All of this is a magic formula for higher stock prices. Many of the spectacular gains in share prices we are seeing this year are in fact a front run of next year?s best case scenario. But there will still be more to run. My guess is that we could tack on another 10% to 15% from current levels in the New Year. That takes the (SPX) as high as 2,100.
So buy the next dip with reckless abandon. And write a letter to your congressmen thanking him for being such an ?hole and creating a great entry point in this melting up bull market.
