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. Read more
If volatility and lack of direction in the equity market are driving you nuts these days, thank your lucky stars you?re not in the oil market. Only last night, a Japanese supertanker plowed into a US Navy destroyer, causing prices to spike. That?s assuming that you had time to notice while sifting through numerous, contradictory leaks from Israeli intelligence about whether they will, or will not, imminently attack Iran. Oh, and don?t forget, demand from Europe is disappearing up its own tailpipe.
My take is that the administration is pursuing the correct policy on Iran. With Europe joining the embargo on June 30, and its major means of trade financed with the dispatch of Standard Chartered, Iran?s economy is now caught in a vice. With minimal domestic refining capacity, the country is drowning in its own oil, but facing several gasoline shortages. Some essential foodstuffs have doubled in price. These are key ingredients needed for the Arab Spring to spill into Iran. Then the country falls into our lap like an overripe piece of fruit, without a shot fired.
It could well be that none of this makes any difference to the price of crude. Like every other asset class, it has become hostage to the likelihood of another round of quantitative easing from the Federal Reserve. West Texas Intermediate has moved an impressive $18 off of its $77 low on the prospect of QE3 alone. All that is left is for Ben Bernanke to pull the trigger.
Our first chance at a hint will be at the Jackson Hole confab of central bankers on August 26. After that, we have to wait until the September 18-19 Open Market Committee Meeting for relief. It is safe to say that if Ben delivers, oil could be trading at triple digits very quickly. If he doesn?t, then we could be plumbing new lows shortly.
That put us in the same risk/reward dilemma for oil as with the equity markets. Note the imbalance. If we get QE3, then we can entertain $6 of upside. If we don?t, you are looking at $25 of downside. Hint: strapping on risk/reward trades like this is not how hedge fund managers get rich.
That makes me a happier buyer on the next big dip than a chaser up here. Names to focus on? ExxonMobile (XOM), Occidental Petroleum (OXY), and Cabot Oil & Gas (COG), as well as the master limited partnerships like Kinder Morgan (KMP), Enbridge Energy Partners (EEP), Trans Montaigne Partners (TLP), Linn Energy (LINE).
That?s all for today. It is hard to write brilliant, seamless prose when you?re brain dead and mindless from nine hours of jet lag. Besides, the whales are still on vacation at Southampton and the South of France, so my traditional sources of hot tips will remain dry for another week or so. Damn! I should have taken an extra week off to investigate economic conditions in the Greek Islands. With a Depression on, I hear that hotels that normally go for $2,000 a day can be had for $2,000 a week.
During my recent trip to Europe, I made another startling discovery about the woeful state of America?s 19th century health care system. I needed to get refills on my prescription drugs when I was in Zermatt, so I stopped by the local pharmacy and placed an order. This was for three different a typical guy my age takes for blood pressure, cholesterol, and arthritis.
Since my insurance isn?t valid in Switzerland, I was expecting to get gouged on the bill. I was amazed when I was told it was only $20 for a month?s supply. The tab? in the US without insurance was $200. Even the copay with my insurance came to $60. Why are identical drugs manufactured by the same company, Roche, ten times more expensive at home than they are in Switzerland? Even when they are invented in the US?
I asked the pharmacist if she had more of the same pills at these prices. She said sure, that I could buy all I want with a doctor?s approval. So that night, I emailed my doctor at home for new prescriptions. I then marched back in the next day and bought a one year supply for everything. Total cost: $360, and presumably, Roche is making at least a 20% profit margin at these prices.
I managed to garner an additional savings from the 40% depreciation suffered by the Swiss franc against the greenback from the 2011 high. The full ticket price for this at home would be $2,400, and the copays alone would total $720.
The savings were enough to take a substantial bite out of the cost of my trip to Europe. US customs didn?t care when I brought them back in. It has to be the multiple 100% mark ups by middlemen along the way, plus some extra cash that somehow gets into the pocket of Blue Cross to pay for the CEO?s private jets that is causing this disparity. So if you plan to visit Europe, bring your doctor?s prescriptions with you. The savings will amount to a bundle.
?There will be much more printing of money because central bankers are willing to do that. This does solve problems, it postpones them so they can become larger,? said Mark Faber, publisher of the Gloom, Boom, and Doom Report.
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
The stock of the day last Friday was, no doubt, JC Penny (JCP), one of the most heavily shorted stocks in the market, which announced Q2, 2012 earnings. Despite a huge miss, the stock soared by 20% because the losses were not as bad as many expected. This leads to the question of whether traders should double up or bail on the existing short positions.
As the dispassionate analyst that I am, who only looks at numbers in the cold, harsh light of reality, the figures could not have been more disappointing. Q2 EPS showed a loss of $0.37/shares versus an expected loss of $0.25. Revenues came in at $3 billion compared to an estimate of $3.2 billion.
Worst of all, same store sales cratered by -21.7% YOY while traffic was off -12%. This is despite offering kids free haircuts. Gross margins shrank and Internet sales were off 30%. To top it all, the company announced that it would no longer provide future guidance. Moody?s immediately followed with a downgrade of the company?s debt from Ba1 to Ba3.
The new CEO, Ron Johnson, has no retail experience and says he needs 4 years for a turnaround. In the meantime, competitor Macys is making good money and selling at 11X earnings with the best CEO in business. Well established luxury brand Coach (COH) sells for a 14X multiple. If you fall in love with retail and absolutely have to be in this sector, there are far better fish to fry. Personally, I would rather lie down and take a long nap.
The hedgies still in this name are clearing gunning for a chapter 11. So a chance to sell again 20% higher than yesterday in the face of bad news has to be attractive. But with such a huge share of the company?s outstanding shares already sold short, the risk reward here is not great. I would have ridden the stock down from $40 to $20 and then said, ?Thank you very much?, rather than chase the last few dollars just to prove I?m right.
The company only has to get a little right to trigger a bigger short squeeze. Technicians were clearly focused on a potential multiyear double bottom on the charts. Besides, I was never one for sloppy seconds, and don?t need a haircut.
Looking for a better stock to sell short at the top of the recent range with dire fundamentals? I?d rather short Morgan Stanley on an up day.
JC Penny: Better Fish to Fry
I am a UH-1Y Huey helicopter pilot in the US Marine Corps. I am currently deployed aboard the USS Boxer as a Forward Air Controller with Battalion Landing Team 1/1, 13th Marine Expeditionary Unit. Our area of responsibility is the Middle East, which is where I?m writing this from now.
I have been a follower of madhedgefundtrader.com for over a year now. A friend of mine from my squadron initially recommended your website to me and I was immediately hooked. I was drawn to the refreshing way in which you neatly tied together financial markets, macroeconomic trends, politics, and just about every other subject you read about in the news. It is a coherent, well-packaged, Theory of Everything which seemed to explain and predict market trends and movements with a grace and accuracy I had never seen before, or even knew existed.
I have always had an interest in investing and the stock market (indeed, just enough of an interest to be dangerous?), but have never seemed to allow myself to ?bite-off? on the image of banking and investing sold by pundits on MSNBC, or in the thousands of get-rich-quick investing books on the shelves of any bookstore. It always seemed like there was some secret that the really successful investors knew which would just never end up in a TV segment, or for sale on a bookshelf.
I was at once impressed and intrigued by the way you were able to step back from the microscope of analyzing price movements and hype in the market, and instead focus on the big global picture and how all of the pieces fit together. This, is art.
It was clear that I could learn a lot of that from you. Right around the end of April though, as your ?RISK OFF? predictions began coming true, I was able to cash in on some successful positions, and I decided it would be well worth my money to sign up for your Macro Millionaire program. Since the first week of May, I have been a Macro Millionaire. I decided to commit 100% to your program and jump in with both feet to try to get the most out of it and have a true shot at success.
I downloaded your spreadsheet for keeping track of positions. I read every article I could find on your website, and a couple of books you?ve recommended. I?ve been able to sit in on your live webinars on three separate occasions from an Internet connection in Djibouti, Africa, where you have personally answered my questions.
I?ve followed every Trade Alert you?ve sent out (as best as I could considering the difficulty of trading stocks on a deployment), and have even begun using the techniques you?ve taught me and your broad market predictions to make a few profitable trades of my own.
I continue to see the greatest value of your product in an education on finance, economics, and the world, which I will carry with me for the rest of my life. You?ve somehow managed to take a whole bunch of topics I?ve been interested in studying, and weave them carefully together to show me a new way of looking at the world, and business. This education alone is worth the fee.
As I am on a ship with no phone, you have my permission to use this testimony in any way you see fit. Take care, and thanks for your efforts.
Sincerely,
Justin Savino-Sullins
Captain, USMC
?I used to tell lies. But I?ve given it up, because the field has become overrun with amateurs,? said the great American 19th century humorist, Mark Twain.
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