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
February 4, 2013
Fiat Lux
Featured Trade:
(GOLDILOCKS DELIVERS A NONFARM PAYROLL),
(SPY), (SPX), (DOW),
(FEBRUARY 6 GLOBAL STRATEGY WEBINAR),
(LOOK AT THAT YEN!), (FXY), (YCS)
Does it get any better than this? First, the hometown San Francisco Giants win the World Series in a four game sweep. Then the San Francisco 49er?s play in the Super Bowl. Finally, I win the World Series/Super Bowl of investing by capturing an absolutely pyrotechnic 21% year to date performance, boosting me once again the top ranks of the hedge fund industry. Hey, two out of three is not bad. 31-34, ouch! Life is good.
Back in the real world, traders were humming the rhythms of Lauren Hill?s Doo Wop on Friday, the top selling hit of 1998. That was the last time that a January posted such a virile stock market performance. In London they were humming Donna Summer?s This Time I Know It?s for Real, who led the charts with this tune in 1989, the previous time the FTSE 100 delivered such robust numbers.
No, this is not a compilation of Golden Oldies. Not too hot, not too cold. That was the conclusion of the equity markets on Friday when the Dow blasted over 14,000 for the first time in 5 years. With many researchers expecting a January nonfarm payroll over 200,000, you would think traders would have dumped shares on a 157,000 print. The headline unemployment rate remained etched in stone at 7.9%. Instead, stocks gapped up at the opening and never looked back, closing at the highs, up 147.
The phone lines between Wall street and San Francisco burned up with portfolio managers and investment advisors trying to figure out why. It appears that the number was strong enough to maintain a tepid 2% GDP growth rate. But is was not so expansionary as to prompt the Federal Reserve to abandon is quantitative easing policy any time soon, on which risk assets everywhere have been richly feasting.
I can see a particular psychology taking hold on Wall Street. Good data is proof that our buying of shares with reckless abandon is justified. Bad data is written off as a backward looking, one time only, statistical anomaly, as we saw with the incredibly weak Q4, 2012 GDP report of -0.1%.
In this scenario, the market either goes up, or goes up more. A new, all time high for the Dow this week looks like a done deal. We could hit my 2013 target of a Standard and Poor?s (SPX) of 1,600 by March. Like my friend, hedge fund giant, David Tepper, says ?When there?s a bubble, act bubbly.?
Our Course, I warned you all this was coming as far back as October (click here for ?My 2012-2013 Stock Market Forecast? ). I followed up with my ambitious ?Why My Shorts are Missing? in December, pressing the point home (click here ). Then, I really went out on a limb in my ?2013 Annual Asset Review? (click here), arguing that we would see an unprecedented market multiple expansion in the face of weak earnings growth. That is exactly what we got.
It is a good thing that I put my money where my mouth was. That has earned followers of my Trade Alert Service a blistering year to date performance of 21%. If the latecomers, short coverers, and lemmings keep pouring into this market, I could double that by April.
The Trend is Your Friend in Weekly Jobless Claims
Ten Years of Nonfarm Payroll
Looks Like It?s Rising to Me
All of those years spent living in rabbit hutch sized apartments, getting hand packed by white gloved railway men into rush hour train cars, and learning an impossible language, are finally paying off.
I have to tell you, I really have to think hard to recall a plunge in a major currency that has been as dramatic as the yen?s over the past two months. Since the Mid-November route began in earnest, the cash market has collapsed from ?76.80 to ?92.60 to the dollar. That has taken the ETF (FXY) down from $126.30 to an eye popping $105.50. The double leveraged short ETF (YCS) soared from $42 to $57.93. It?s a good thing that I was short the entire time.
In fact, I have devoted 20% of my entire capital to short yen plays since the beginning of the year. Newly elected Prime Minister, Shinzo Abe, was my willing coconspirator this week, announcing one of the most ambitious, expansionary budgets in history. The vice governor of the Bank of Japan chipped in, suggesting that the yen had more room to fall. Another senior government official suggested that ?100 to the dollar might be a reasonable target. It seems that any time someone in Tokyo says ?boo?, another round of yen selling by traders ensues.
But like all good things, this trade is getting rather long in the tooth. I?ll tell you how this is going to end. When the cash market declines to ?96 to the dollar, the grumblings about unfair import competition by the US car industry will escalate to an uproar. At ?100 to the dollar it will balloon into a full blown trade dispute. So get ready to start hearing a lot about Japan?s unfair manipulation of their currency to undervalued levels, especially from congressmen from Midwest states with large car plants.
The yen will probably fall short of that. The last time this happened, in the early 1990?s, the US was afraid that Japan was taking over the world. Our country was recoiling from a Japanese share of the American car market that had ratcheted up from 1% to 43% in just 20 years. Remember the tome ?Japan is Number One?? You have to laugh now.
Those fears abated long ago. A Japanese collapse on the scale of an IMF bailout is now much more likely than Japanese dominance. It?s tough to smack down an international competitor that is trying to claw its way up after 20 years on the mat. One complicating factor this time is that the principal lobbyist against a stronger yen is now US government owned, General Motors (GM).
I get emails every day from readers asking if they should initiate, double up, or triple up their short positions in the yen. As of today, I am saying no more. My best-case scenario had Japan?s beleaguered currency plunging to ?92 over the course of the next several months. Here we are over that figure in just ten weeks. So at best, a short yen position is a ?HOLD? here. Don?t chase it any more. Remember, hogs get fed, but pigs get slaughtered.
Japan is not an entirely bad place. Certainly the world would be a duller, more boring place without sushi, sake, hot tubs, and karaoke. And I never heard anyone complain about those coed public baths. Too bad I could never find a pair of sandals that fit.
Six Month Chart
Five Year Chart
?The January effect has been supercharged this year and needs to be checked for doping,? said Sandy Lincoln from BMO Asset Management.
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
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
February 1, 2013
Fiat Lux
Featured Trade:
(TRADE ALERT SERVICE POSTS BLAZING 16.75% JANUARY GAIN),
(LUNCH WITH SUPREME COURT JUSTICE SONIA SOTOMAYOR),
(TESTIMONIAL)
The Trade Alert Service of the Mad Hedge Fund Trader posted a
16.75% profit in January, an all time monthly high. The 26-month total return has punched through to 71.80%, compared to a miserable 10% return for the Dow average. That raises the averaged annualized return to 33.13%, elevating to the top of the hedge fund ranks.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service, daily newsletter, real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
?I have to admit that it was with some trepidation that I joined Supreme Court Justice, Sonia Sotomayor, for lunch this week in San Francisco. I have friends in the New York federal prosecutors office who warned me that she was tough as nails and a complete bitch, first as a prosecutor herself, and later as a judge.
I confided this observation to her, and she agreed completely. Growing up as a poor Hispanic girl in the South Bronx, with a single parent family, demanded more than toughness. Her father died young from chronic alcoholism.
As a kid, she beat up a lot of others, but was thrashed often herself. It was certainly no place for weaklings, or those who stuck to establishment rules. Her family nicknamed her ?ahi?, Puerto Rican for ?hot chili pepper.?
Interviewing Supreme Court justices is tough, as I learned when I met Sandra Day O?Connor a few months ago, the first woman ever appointed. But at least we had some common ground, both growing up on ranches in the baking Southwest before air conditioning was invented. The great insight with her was that on her first day at work there was no woman?s bathroom at the Supreme Court. Sonia Sotomayor would be a different kettle of fish.
Justices are not permitted to comment on any cases in the recent past, present, or those that may appear in front of them in the future. And by recent, I mean in the past 12 years. You really have to go back to Andrew Jackson for them to feel totally comfortable.
Back then, my own family took a case to the court on the interpretation of the India Removals Act of 1830. We won. So the best that you can do is try and get the measure of the person, their character and their motivations, and distill down their essence. Then you have to extrapolate forward as to how this may influence their future decisions.
You might ask what this piece is doing in an investment newsletter. But the Supreme Court is playing a growing role in the lives of traders. The recent decision in favor of Obamacare totally upended the entire health care industry, which accounts for no less than 12% of our GDP, and will soon rise to 18% (You sold the HMO?s and bought the drug companies).
The Citizens United decision permitting unlimited anonymous corporate political donations was a boon for the media and the Washington DC commercial property market, as tens of thousands of new lobbyists were hired. Bush v Gore, which decided the 2000 presidential election, turned out to be the greatest windfall in history for the oil and defense industries. Investors ignore the Supreme Court at their peril.
Justice Sotomayor frankly admitted to me that she was an early beneficiary of affirmative action. But she ran like thoroughbred, once the bit was between her teeth. She was one of the first women admitted to Princeton, which proved to be a totally alien environment. There she heard a Southern accent for the first time. The looking glass metaphors in Lewis Carol?s Alice in Wonderland were unknown to her.
When invited to join Phi Beta Kappa for her academic excellence, she thought it was a scam. They asked for money for a lousy symbolic key, so she threw it in the trash. Sonia rarely slept, graduated Summa cum Laude in 1976, and moved on to Yale Law School.
Racial slurs, sexism, and discrimination, feature large in her life. When she worked as a corporate litigator, a senior partner complained that he didn?t know why the firm was hiring all these minorities, only to dismiss them for incompetence a few years later. I hope this guy isn?t planning on pleading any cases in front of the Supreme Court in the near future. In fact, Sotomayor will have to rule on a reverse discrimination case brought by a white college student some time this year.
Sotomayor is one of those rare individuals who walks a fine line between both political parties. She was appointed a federal judge by George H.W. Bush. She was moved up to the Appeals Court by Bill Clinton. Obama named her as his second Supreme Court appointment, and only the third woman in history.
I think the majority of observers missed the most important outcome of the 2012 presidential election. If a conservative justice dies or retires before 2016, and another liberal replaces Justice Ruth Bader Ginsburg, the impact on history will be huge. Then, the court swings from a 5-4 conservative vote, where it has been for the past 40 years, to 5-4 liberal for the next 40 years.
Sotomayor is a crucial part of this plan, and is so far following the script. In her first case, during which she confesses she was ?terrified?, she dissented on the above-mentioned Citizens United case. She has voted with left leaning Justices Ginsburg and Stephen Breyer 90?percent of the time, one of the highest agreement rates on the Court. She was in the 5?3 majority in Arizona v. United States that struck down several aspects of the state?s anti-illegal immigration law. She was also in the 5-4 majority that ruled in favor of Obamacare.
The US Supreme Court is a world stage, as its decisions are closely followed by many other countries. It is a non-stop conversation in which she walked at mid point. Sonia says most people would find her job boring, as it is very contemplative. The court only hears 60-80 cases a year, and allocates just an hour to hear arguments for each case. The rest of her time is spent reading, writing, editing, and arguing with other justices.
The reality that there is no higher court than her own places an additional burden on her decisions. It is all humbling, as every case produces someone who, in the end, believes an injustice has been done. You can?t play God. Sotomayor is the only member of the court who has worked as a judge.
Sonia revealed to me that her inspiration to go into law came from the Nancy Drew children?s mystery novels and the Perry Mason TV series. Chronic type 2 diabetes prevented her from working in the field. For her, being a lawyer enabled her to work as a detective while in the confines of an office.
On January 21, Sotomayor administered the oath of office to Vice President, Joseph Biden. Not bad for someone who claims her main accomplishment in life was throwing the opening pitch at a New York Yankees game in her hometown Bronx.
As our lunch broke up, she invited me to Washington to tour the Supreme Court and meet the other justices. I said I might just take her up on that.
