Page 1886 - Mad Hedge Fund Trader

Report From Las Vegas

As with all of my visits to Sin City, I made a beeline to my inside guy ? a blackjack dealer at Caesar?s Palace. It?s been a slow summer and an even slower fall. With global warming delivering the hottest summer in history, the last place tourists wanted to visit was the desert. Midwesterners have been particularly hard hit, as the heat has caused crop failures on a Biblical scale and shriveled incomes. Still, business has been infinitely better than 2008-2009, and most hotels are modestly hiring.

It is wonderful strolling through the finally completed City Center. The glitzy, ultra-modern, Cesar Pelli designed, 16.8 million square-foot, 63- acre complex occupies a quarter-mile on the city?s fabled Strip between the Bellagio and the Monte Carlo Hotels.

It will unquestionably become one of the hedonist Wonders of the World. It includes the Mandarin Oriental, Aria, Veer, Vdara, and Harmon Hotels, offering 4,000 rooms and 2,600 condos. They are adorned by two casinos, a convention center, a new theater for a Cirque du Soleil show called Zarkana, and parking for 6,900.

No matter how healthy the rebound in Las Vegas may be, the forlorn Fontainebleau Resort remains abandoned. The $3 billion, 4,000 room, 68 story hotel, casino, and condo project was to be one of the city?s grandest yet. It was 95% complete when the crash hit and construction ground to an immediate halt, wiping out all of the original equity investors. Nobody does creative destruction like America.

Corporate raider, Carl Icahn, bought it for $156 million, then flipped the furniture for $200 million, getting the hotel for free. He is sitting back waiting for a foreign sovereign wealth fund to buy him out at a huge profit. That is what Carl does, bless his soul. In the meantime, the towering structure stands as a monument to the hubris, greed, and excesses of the 2000?s.

My global strategy luncheon at the Bellagio was a total blast, as usual. There was much speculation on the market impact of QE infinity, how the energy revolution was changing the investment horizon, when the bond market bubble would finally burst, and the chances of war with Iran. The guessing game was for which taxes would go up and how much. One gentleman from Canada kindly informed me that since January, he had made $1 million for his personal account from Trade Alerts on the Japanese yen. That?s why I do this job, to level the playing field for the regular guy.

However, navigating this immense convention center can be devilish. Some of my guests went to the U.S. Aids Conference in error, while some of the AIDS people visited my lunch by accident. They were politely redirected. This is why I tell people to allow an hour just to get from the parking lot, past the dancing girls and craps tables in the Casino, to their seat at my table.

I always enjoy doing these lunches, as the feedback I gain from readers is invaluable. Not only do I learn about new, unexplored asset classes and local micro business trends, there are always good suggestions on how I can improve my own service. I also have to confess that hearing about the latest Internet rumors and conspiracy theories is a real hoot. I tell people that all tips obtained from the Internet should be assumed to be wrong, unless, of course, they come from my own newsletter.

The Forlorn Fontainebleau

Welcome to Sin City

May 14, 2013 - Quote of the Day

Quote of the Day

?An analyst is someone who knows a lot about a few things, and learns more and more about less and less, until eventually, he knows everything about nothing,? said Howard Marks, chairman of Oaktree Capital Management, at the Las Vegas SkyBridge Alternative Asset Conference.

SOLD OUT - July 19, 2013, Frankfurt Strategy Luncheon

Lunch

Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Frankfurt, Germany on Friday, July 19, 2013. A three course lunch will be followed by a PowerPoint presentation and an extended question and answer period.

I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $239.

I?ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.

The lunch will be held at a prestigious private club not far for the Botanical Gardens, the details of which will be emailed to you with your purchase confirmation.

I look forward to meeting you, and thank you for supporting my research.

[button size="large" color=(blue) link="http://madhedgefundradio.com/buy-tickets-frankfurt-july-19-2013/"]Order Luncheon Tickets[/button]

May 13, 2013

Diary, Newsletter, Summary

Global Market Comments
May 13, 2013
Fiat Lux

Featured Trade:
(MAY 15 GLOBAL STRATEGY WEBINAR),
(JAPAN IS JUST GETTING STARTED),
(THE PASSING OF A GREAT MAN)

Japan is Just Getting Started

Diary, Newsletter

Constantly chained to my MacBook Pro at home writing this letter, it is not often that I am in the room when a major market-moving event occurs. That is what happened at the SkyBridge Alternatives Asset Conference (SALT) in Las Vegas on Thursday (click here for the link at http://www.saltconference.com/).

I was listening to one of the legendary titans of the hedge fund industry make the case for Japan. According to the rules of engagement, I can?t tell you who he was, or I would have to kill you. I don?t want to do that because if you?re dead, you might not renew your subscription, and that would be bad for business. But I can pass on the gist of his arguments, which are already well known to the readers of this letter.

He said Japanese companies have tremendous leverage to a falling yen. The Bank of Japan was doing what was necessary to move the yen down from ?100 to ?110 to the dollar. The game changer will come when the government announces its restructuring plan in a few months.

Therefore, Japan?s TOPIX Index at a 13-14X earnings multiple looks cheap. That?s why his fund has been running a major long Japanese stock/short yen position since last year. If he is right, a Nikkei average of 20,000 is in the cards, up another 36% from last night?s close.

I was watching the Currency Shares Japanese Yen Trust (FXY) tick on my iPhone 5s as he spoke. It immediately gapped down 100 basis points. I surveyed the room and saw many heads bowed, fingers furiously typing the news to trading desks, or entering their own ?SELL? orders into online trading platforms.

That smashed the cash market through major resistance at the ?100 barrier, a new four year low. If I had been as digitally endowed, I would have sent out my own Trade Alert to dump the yen. But I?m not. By the Friday opening the next day, (FXY) had given up an additional 100 basis points.

I had been holding back on selling the yen in recent weeks for several reasons. First, we have covered a lot of ground very quickly, the beleaguered Japanese currency plunging 25% in just six months. That is prompting Japanese owners of the $2 trillion in direct and indirect foreign assets to realize some of the recent $500 billion in paper gains. That creates yen buying and downward pressure on the dollar.

Finally, my own trading gains have been so enormous this year, up some 35%, that I am becoming less inclined to stick my neck out and take inordinate risks. Trading has become more of a cherry picking game.

However, the yen?s move through ?100 has been so violent, and on such big volume, that it looks like the real deal. That means the old ?100 upside resistance level now becomes support. That equates to $101.00 in the (FXY). So my (FXY) June, 2013 $100-$103 in-the-money bear put spread actually looks pretty cautious.

This lines up nicely with my own long term downside target for the yen of ?150. This may sound like one of those outrageous predictions one finds so often on the Internet. For me it is not such a stretch. When I first arrived in Tokyo in 1974 and Nixon was taking the US off the gold standard, the yen had just devalued from the old Dodge Line of ?360 to ?305. The move I am predicting represents a give back of only a quarter of the gains since then.

If I am right, it would make my hedge fund friend?s upside predictions for the Nikkei look downright conservative. It would take the ProShares Ultra Short Yen ETF (YCS) from $68 to over $110. It would also boost the Wisdom Tree Japan Hedge Equity ETF (DXJ) from $49.67 to as high as $100.

I indicated to readers at the beginning of the year that this could be the trade that keeps on giving, like having a rich uncle. It looks like, so far, I am right.

Looks Like We?re Just Getting Started

May 13, 2013 - Quote of the Day

Quote of the Day

?Everything begins and ends with quantitative easing?, said Jeffrey Gundlach, the CEO of hedge fund Doubleline Capital, and the new bond king.

Follow Up to Trade Alert - (FXY) May 10, 2013

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more

Trade Alert - (FXY) May 10, 2013

Trade Alert

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more

May 10, 2013

Diary, Newsletter, Summary

Global Market Comments
May 10, 2013
Fiat Lux

Featured Trade:
(THE REAL ESTATE MARKET IN 2030)
(BREAKFAST WITH FED GOVERNOR BOB MCTEER),
(TAKE A RIDE IN THE NEW SHORT JUNK ETF),
(SJB), (JNK), (CORN)

ProShares Short High Yield (SJB)
SPDR Barclays High Yield Bond (JNK)
Teucrium Corn (CORN)

The Real Estate Market in 2030

Diary, Newsletter

Long time readers of this letter know too well that I have been hugely negative on the sector since late 2005, when I unloaded all of my holdings (click here for ?The Hard Truth About Residential Real Estate?).? However, I believe that ?forever? may be on the extreme side. Personally, I believe there will be great opportunities in real estate starting in 2030.

Let?s back up for a second and review where the great bull market of 1950-2006 came from. That?s when a mere 50 million members of the ?greatest generation?, those born from 1920 to 1945, were chased by 80 million baby boomers born from 1946-1962. There was a chronic shortage of housing, with the extra 30 million individuals never hesitating to borrow more to pay higher prices. When my parents got married in 1948, they were only able to land a dingy apartment in a crummy Los Angeles neighborhood because my father was an ex-Marine. This is where our suburbs came from.

Since 2005, the tables have turned. There are now 80 million baby boomers attempting to unload dwellings on 65 million generation Xer?s who earn less than their parents, marking down prices as fast as they can. As a result, the Federal Reserve thinks that 45% of American homeowners either have negative equity, or less than 10% equity, which amounts to nearly zero after you take out sales commissions and closing costs. That comes to 70 million homes. Don?t count on selling your house to your kids, especially if they are still living rent-free in the basement.

The good news is that the next bull market in housing starts in 10 years. That?s when 85 million millennials, those born from 1988 to yesterday, start competing to buy homes from only 65 million gen Xer?s. The next recession will probably knock another 25% off real estate prices. Think 1982 again. Fannie Mae and Freddie Mac will be long gone, meaning that the 30-year conventional mortgage will cease to exist.

All future home purchases will be financed with adjustable rate mortgages, forcing homebuyers to assume interest rate risk, as they already do in most of the developed world. With the US budget deficit problems persisting beyond the horizon, the home mortgage interest deduction is an endangered species, and its demise will chop another 10% off home values.

To make matters worse, Ben Bernanke?s current massive monetary expansion assures that there will be one at least one, and possible two interest rate spikes by 2030. If you think the real estate market is bad now, wait until mortgage rates hit 18%.

For you millennials out there just graduating from college now, this is a best-case scenario. It gives you 10 years to save up the substantial down payment banks will require by then. You can then swoop in to cherry pick the best neighborhoods at the bottom of a 25 year bear market, much like your grandparents did in 1954. People will no doubt tell you that you are crazy, that renting is the only safe thing to do, and that home ownership is for suckers. That?s what people told me when I bought my first New York coop in 1982 at one-tenth its current market price.

Just remember to sell by 2060, because that?s when the next intergenerational residential real estate collapse is expected to ensue. That will leave the next, yet to be named generation, holding the bag, as your parents are now.