Global Market Comments
March 15, 2013
Fiat Lux
Featured Trade:
(TAKING PROFITS ON STOCKS), (SPY),
(TAKING A BITE OUT OF STEALTH INFLATION),
(TESTIMONIAL)
SPDR S&P 500 (SPY)
With the (SPY) approaching an all time high, there are just a few pennies to go, I am going to take the money and run on my position in the SPDR S&P 500 (SPY) April, 2013 $145-$150 deep in-the-money bull call spread. At $4.97, there is only 3 cents left in potential profit, and I would have to run the position for another month to get it. We have already captured 93% of the potential profit in this position. The risk/reward here is no longer attractive.
The market is now up ten days in a row, the most since 1996, and has gained every day in March. Will it shoot for 11? It looks like it. By freeing up cash here we gain some dry powder to use on any market dips. That is, if they haven?t made selling stocks illegal, which the market apparently thinks they have. It also means you don?t have to rush out and change your underwear every five minutes if one of my predicted black swans comes in for a landing.
There is also the matter of being up 31% so far this year, I have outperformed virtually everyone in the hedge fund industry, except for maybe David Tepper (Thanks for the heads up, David!). With this trade, I have closed out 15 consecutive profitable trades. I have another six moneymakers still on the books, taking my own hot streak up to 21. The only trade I have lost money on during 2013 is with Apple (AAPL).
That means I no longer need to swing for the fences to make my year. Instead, I can settle back into the sort of ultra cautious, scaredy cat, type of trades typical for an investor of my advanced age. That is, unless, we get a 5% dip in the market, in which case, it will be pedal to the metal once again.
That?s My Kind of Trade!
When I visited the local Safeway over the weekend, I was snared by some uniformed pre-teens, backed by beaming mothers behind a card table selling Girl Scout cookies. I was a pushover. I walked away with a bag of Thin Mints, Lemon Chalet Creams, Do-Si-Dos, and Tagalongs.
I have to confess a lifetime addiction to Girl Scout cookies. During the early eighties, one of the managing directors at Morgan Stanley's equity trading desk had a daughter in this ubiquitous youth organization. One day, she pitched to all 200 traders on the floor, going from desk to desk with sheets of paper taking orders. I used to buy two of everything she offered, as some clients preferred a few boxes of these delectable treats over lunch at the Four Seasons any day. Other's ordered hundreds. I later heard that the girl was the top performing scout in the greater New York area two years running.
But this year, when I got home and opened the boxes I was shocked. While the price was the same, the number of cookies had shrunk considerably. I knew it was not my waist line the scouts were concerned about. I was seeing the dastardly hand of 'stealth inflation' at work. In this deflationary environment, companies loathe to raise prices. Food companies are especially hard hit, with many commodities like wheat, corn, sugar, soybeans, and coffee up 50%-300% in a year. Any attempt to pass these costs on to consumers is punished severely. So companies cut costs, quantity, and quality, instead, by shrinking the size.
I think you are seeing stealth inflation breaking out everywhere. It is not just in food. Many products seem to be undergoing a miniaturization process while prices remain unchanged. It also extends to services, where a dollar buys you less and less. This is how the consumer prices index is staying in low single digits, despite anecdotal evidence everywhere to the contrary.
Meet the Ugly Face of Stealth Inflation
Dear Mr. Thomas,
I just wanted to drop you a line and thank you for everything you do for our amazing industry.
I have been working in the business for about 2 years now, I am a partner in a start-up fund, trading forex, and I have learned so much from your website and the little snippets of info that you give.
You have helped me to learn my way through this complicated business and have made learning fun.
Anyway, thank you for sharing your amazing info and I look forward to reading more from you in the future.
All the best.
Mark
Cancun, Mexico
?I figured it was just as easy to hear ?no? from someone who?s wealthy as from someone who is not wealthy,? said Steve Lockshin of Convergent Wealth, the largest independent financial advisor in California, with $10.5 billion in assets.
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
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
Global Market Comments
March 14, 2013
Fiat Lux
Featured Trade:
(2013 STRATEGY LUNCHEON SCHEDULE),
(THE ELTON JOHN MARKET), (SPY),
(RAMPANT WAGE INFLATION STRIKES CHINA), (FXI), (CYB)
SPDR S&P 500 (SPY)
iShares FTSE China 25 Index Fund (FXI)
WisdomTree Chinese Yuan (CYB)
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Luncheons, which I will be conducting throughout the US and Europe over the next five months. An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets will vary according to each city, depending on local costs, but will be around $200 per person.
I?ll be arriving at 11:00 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. You never know who is going t show up for these events, and I always manage to learn something new. I find the discussions and debate with my guests incredibly productive.
I look forward to meeting you, and thank you for supporting my research. You find the current schedule below. To purchase tickets for the luncheons, please go to my online store.
April 12 San Francisco
April 19 Chicago
July 2 New York
July 8 London, England
July 12 Amsterdam, Neth.
July 16 Berlin, Germany
July 18 Frankfurt, Germany
July 25 Portofino, Italy
August 1 Mykonos, Greece
August 9 Zermatt, Switzerland
I remember 1997 like it was yesterday. Bill Clinton was president, the US government was running a balanced budget, and the Dotcom IPO bubble parties in Silicon Valley were happening almost every day.
The Florida Marlins beat the Cleveland Indians in a seven game World Series, where the last game went to a heart stopping 11 innings. Elton John scored the top hit of the year with ?A Candle in the Wind.?
1997 was also the last time that the Dow average closed up for nine consecutive days. Sure, the market only managed to eke out a 5.22 point gain. But hey, up is up.
The market was on its way to losing its winning streak until hedge fund legend, my old buddy David Tepper, spoke to the press. He mentioned that the Dow could end up 20% in 2013. That means we still have another 9.5% to go, potentially taking the Dow as high as 16,000. Warning: David has a long history of being right, with his own long-term average annualized return nearly matching my own at 38%.
One could easily imagine a course of events that gets us there. The Republicans and Democrats kiss and make up and produce a budget acceptable to both sides that cuts our deficit over the long haul. The sequester ends. China stops double dipping. Europe gets its act together, with ECB president, Mario Draghi, finally cutting euro interest rates. Oil prices collapse.
There is another big factor that could keep driving share prices higher. Ben Bernanke could keep the pedal to the metal and maintain the present rate of monetary easing. March is turning into one of the most fascinating months in the history of the bond markets. For the first time ever, The Fed is buying more bonds that the Treasury is issuing, with the excess demand getting soaked up in the marketplace.
Without a doubt, the most underestimated, misunderstood development of the year was when the esteemed Fed chairman told us that they may never sell their $3 billion plus stash of Treasury bond holdings, but hold them until maturity instead.
This is huge. It means that the Armageddon predicted by everyone when the Fed unwound its massive bond position is never going to happen. Instead, we will see a slow grind higher in yields and lower in prices. I have been expecting this all along, warning readers in my own forecasts that we may never get the bond market crash they had been hoping for, and that they should avoid high cost of carry short bond plays, like the (TBT).
As a mathematician, I have to assume that Chaos Theory is going to kick in here pretty soon and force the indexes to revert back to the mean. This is another way of saying the longer the market moves in a single direction, the greater the probability that it will reverse.
Not to do so will really tempt fate. That is why I picked up a modest short position in stocks today, selling some short dated, deep out-of-the-money, calls on the S&P 500 (SPY). I am also deliberately dragging my feet in adding any new longs to the Trade Alert Service model-trading portfolio.
Even if Tepper is right and we blow through the top end of the most wildly bullish forecasts for 2013, we need to have a pullback first. Yes, it has been a long wait. But nothing goes up forever, trees don?t grow to the sky, yada, yada, yada.
When the hiatus begins, there should be room to make some money through the type of short position which I tacked on today. David did not say he expects the market to rise to 16,000 by the end of this quarter, which is already on track to deliver the best stock market performance in history.
If the Dow closes up again for a 10th day in a row, it will be the longest string of wins since 1996. What was the number one hit that year? The ?Macarena?? Can you hum a few bars for me?
