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
The Euro hit my yearend target today after a two cent plunge sent it down to the $1.29 handle. You can thank German Chancellor, Angela Merkel, who in the strongest possible terms, said there was no way she would consent to an increase in the size of the European bailout package.
It didn?t help that in the Federal Reserve comments today they basically ran up the white flag and admitted that there is nothing left for them to do but keep interest rates at ?exceptionally low levels? for the foreseeable future. They see moderate growth last pegged at 3%, which means they are about 1% higher than reality.? We are left to wait until January 25 for the all-powerful government agency to take longer term measures to help the economy, such are targeting unemployment rates.
I have been happily trading in an out of the Euro from the short side since April, catching almost all of the move down from $1.50, except for the last three cents. There was clearly a lot of new shorts initiated today as the euro broke multi month support levels. To say this is a crowded trade would be a vast understatement, as these new positions are being added to existing ones that are at all-time highs. A recent survey revealed that 67% of all hedge funds are currently running short positions in the Euro.
This is a crummy place to get involved, as the beleaguered European currency is now severely oversold on a short term basis. I want to wait for a four cent rally against Uncle Buck to jump back in the game again. I would be surprised if we plumbed new lows from here, but then this has been a surprising year. Wait until Q1, 2012 before we see a $1.25 print.
It would be easy to sit back and be complacent, believing that this is not our problem. But it is. A recession that Europe?s new austerity is certain to bring, will likely chip 0.5% to 1.0% off of US GDP growth in 2012. Since we are likely growing at a modest 2% rate now, we don?t have a lot to give away. Looking at an American economy that is facing death by a thousand cuts, this is one giant slash.
Auf Wiedersehen Euro!
Today was a real head scratcher for long time market observers, including myself. Cross market correlations that have served me so well this year are breaking down, and their predictive power has suddenly gone blind. I blame this on the liquidity drought that has plagued the market since the beginning of the month that has confined markets to frustratingly narrow ranges.
There are many reasons for the sudden opacity. The usual seasonal flight to the sidelines seems more pronounced than in years past, as many managers attempt to put a dreadful year behind them. There is still $500 million in trading capital missing from traders who used MF Global as a prime broker. This is especially felt in the energy and metals markets where MF had such a large presence.
High frequency traders have also decamped for more fertile climes in the oil and foreign exchange markets. And we all know that the big hedge funds are getting redemptions, cutting them off at the knees until January.
I?ll give you a few examples. Falling stock markets almost always produce a rising volatility index. But today it fell as low as 23%, a five month low, and closed at only 25.4% even with the Dow off 66 points. The correlation between stocks and gold has been almost perfect since the summer. But the barbarous relic has been in free fall since yesterday with the S&P 500 essentially unchanged. Ditto with the Euro, which managed a two cent plunge today.
The larger question for traders is whether this is a onetime only breakdown in cross market linkages that will end in January, or is it the beginning of a more permanent continental drift. We will find out next month when the ?A? Team managers return to the market and volume recovers.
Let me toss an alternative theory out there. It appears that the year to date returns for all asset classes are rapidly converging on zero. That?s why assets like gold and silver with the great 12 month returns are having the biggest falls this week. The S&P 500 is now down 2.2% on the year, and the Euro is up a miniscule 1.1%. Gold is still hanging on to a 17% gain, while silver is up only 12%, both rapidly headed towards single digits
Is this the inevitable result of a ?no return? world? Sounds like I better stay out of the market in this performance sapping environment, lest my own profits go up in a puff of smoke.
The ?A? Team Traders Are Gone Until January
I?m only 45 days into ?Macro Millionaire? and I wanted to drop a note to say thank you. As a relatively novice trader, your perspective, analysis and trade alerts have given me the tools to show a 96% return so far. They've been a result of my taking additional risk with your ideas.
You have a great product and deliver incredible value. Don't let anyone tell you otherwise. I hope others realize how fortunate they are to have found you and Macro Millionaire.
Fiat Lux!
Bryon Z.
Walnut Creek, CA
?We should thank Meredith Whitney for creating a buying opportunity in municipal bonds,? said Aaron Gurwitz, CIO and chief strategist at Barclays? Wealth Management.
I have to tell you that I am not feeling the love from my silver position. I hung on faithfully for a month while the (SLV) churned around the 50 day moving average, building a base for a possible upside breakout. It was not to be. With another ?RISK OFF? day on our plate this morning it is clearly time to pull the ripcord on this unloved metal.
Let me tell you what I missed. Silver is still one of the few profitable positions owned by hedge funds, as it is up around 10% year to date. As we plow into the yearend book closing, hedgies have been booking profits in the white metal to offset their abundant losses in other holdings, such as in financials and their short positions in Treasury bonds.
This was offset by panic buying of precious metals in Europe until last week. Progress on a solution of the sovereign debt crisis has cooled demand from this source, taking the knees out from under the entire precious metals space.
Gold (GLD) has already broken its two month support with its $50 plunge today. I won?t wait for silver (SLV) to do the same. The damage is also evident with the other precious metals, including platinum (PPLT) and palladium (PALL).
On top of this, we only have one month of life left in the January options, and from here on, accelerated time decay kicks in. I?m sure silver will see $37, $42, and even $50 or higher someday, just not in the next five weeks.
Whenever I take a loss like this I tell people that this is proof that the track record is real. The fake ones never lose money. It just illustrates the value of using an options strategy during these volatile, unpredictable, and tumultuous times. I never risked more than 5% of my capital. I never lost sleep over the position. I took a 4.27% hit, even though silver fell 12%. I never doubled up on the downside, which the silver permabulls begged me to. Being able to walk away from a position if it turns bad is a great luxury, but it still costs money.
I live to fight another day.
Pulling the Ripcord on Silver
With the onset of the 2012 elections in a few weeks, the class warfare against the millionaires is about to start in earnest. In California, the issue has already been decided, and the millionaires have definitely lost.
On the November ballot will be no less than five measures to raise taxes on high income earners, primarily to fund the state?s increasingly impoverished education system. Deficits have forced public schools to lay off teachers and replace them with inexperienced temps without benefits, shrink the school year, cancel electives, increase class sizes, and end sports and music programs. Many teaches are now paying for class supplies out of their own pockets
Why should you care, comfortably resident in one of the other 49 states? Because the Golden State often initiates social and economic measures which are then adopted by the rest of the country and the world. Take a careful look at your catalytic converters, seat belts in cars, ceilings on car emissions, caps on real estate taxes, smoking bans in bars and airplanes, recycling program, and environmental controls.? They all carry a ?Made in California? stamp on them.
The revenue raising efforts are aimed at heading off a state budget shortfall that is expected to top $13 billion in 2012. The current top California income tax rate is already a hefty 9.3%.
To give you a preview of what is headed your way, below is a listed of the proposed levies:
*Governor Jerry Brown is proposing a 1% surtax on those making more than $250,000, and a 2% tax over $500,000. Everyone else gets hit with a half cent rise in state sales taxes.
*Billionaire investor Nicolas Berggruen has teamed up with Google?s Eric Schmidt and retired real estate magnate, Eli Broad, to back a 1% surtax on income of over $1 million, to be partially offset by a reduction in corporate income taxes from 8.84% to 7%. There will be a new sales tax on services of 5% which are currently tax free. These would raise $10 billion a year.
* Berkshire Hathaway trust fund kid Molly Munger is trying to push through a $27,266 wealth tax on couples earning more than $1.5 million that would raise $10 billion.
*San Francisco hedge fund manager Tom Steyer would tax corporations nationally on their California based income, potentially raising $1 billion.
*The California Federation of Teachers wants to raise taxes on incomes over $1 million by 3%, raising $6 billion.
Tax opponents and libertarians are hoping that by having such a profusion of measures on the ballot, they will split the vote with then end result that none pass. And while many of the state?s ideas are later adopted elsewhere, sometimes they don?t work out so well. California?s 1920?s eugenics policies and racial laws were later used by Adolph Hitler as the legal foundation for Germany?s holocaust.
Be careful what you wish for, and expect a rising tide of tax refugees looking for new homes in your state.
?Isn?t it funny when you walk into an investment firm, and you see all of the financial advisors watching CNBC?that gives me the same feeling of confidence I would have if I walked into the Mayo Clinic or Sloan Kettering and all of the doctors were watching the TV soap opera General Hospital,? said a bond manager friend.
Trade Alerts are a premium subscription service, you must login to read the details. 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