Posts

February 7, 2019

Global Market Comments
February 7, 2019
Fiat Lux

Featured Trade:
(WHAT TO BUY AT MARKET TOPS?),
(CAT), ($COPPER), (FCX), (BHP), (RIO),

(EUROPEAN STYLE HOMELAND SECURITY),
(TESTIMONIAL)

January 10, 2019

Global Market Comments
January 10, 2019
Fiat Lux

Featured Trade:

(JANUARY 9 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (UUP), (FXE), (FXY), (FXA), (AAPL), (GLD), (SLV), (FCX), (SOYB), (USO), (MU), (NVDA), (AMD), (TLT), (TBT), (BIIB), (TSLA)
(TESTIMONIAL)

November 19, 2018

Global Market Comments
November 19, 2018
Fiat Lux

Featured Trade:

(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or MASS EVACUATION)
(SPY), (WMT), (NVDA), (EEM), (FCX), (AMZN), (AAPL), (FCX), (USO), (TLT), (TSLA), (CRM), (SQ)

September 24, 2018

Global Market Comments
September 24, 2018
Fiat Lux

Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or IT’S FED WEEK),
(SPY), (XLI), (XLV), (XLP), (XLY), (HD), (LOW), (GS), (MS), (TLT),
(UUP), (FXE), (FCX), (EEM), (VIX), (VXX), (UPS), (TGT)
(TEN TIPS FOR SURVIVING A DAY OFF WITH ME)

August 22, 2018

Global Market Comments
August 22, 2018
Fiat Lux

Featured Trade:
(WHY DOCTOR COPPER IS WAVING A RED FLAG),
($COPPER), (FCX), (USO),
(HANGING OUT WITH THE WOZ),
 (AAPL)

Why Doctor Copper is Waving a Red Flag

One of my responsibilities as a global strategist is to talk about how cheap stocks are at market bottoms, and how expensive they are at market tops. In all honesty I have to tell you that 9 ½ years into a bull market, we are now much closer to a top than a bottom.

If Dr. Copper has anything to say about it the global economy is already in a recession. Since the June peak, trade wars have taken the red metal down a gut-punching 22.7%. The world’s largest copper producer Freeport-McMoRan (FCX), a Carl Icahn favorite, is off an eye-popping 30.6% during the same period.

Should we be running around with our hair on fire?  Is it time to throw up on our shoes? I don’t think so…not yet anyway.

Dr. Copper achieved its vaunted status as a leading indicator of economic cycles for the simple reason that everyone uses copper. Building and construction took up 43% of the supply in 2017, followed by electronics (19%) and transportation equipment (17%).

China is far and away the world’s largest consumer of copper. In 2017, it bought 48% of total world output. However, red flags there are flying everywhere.

Back in the 2000s, when China was building a “Rome a Day,” demand for copper seemed limitless. Since then, Chinese construction has fallen to a low ebb as the greatest infrastructure build-out in history came to completion.

China has steadily moved from an export-oriented to a services-driven economy, further eroding the need for copper. I warned investors of this seven years ago. That is why the Mad Hedge Fund Trader has issued virtually NO commodities-based Trade Alerts since then.

Before the last financial crisis Chinese banks accepted copper ingots as collateral for business loans. That practice is now banned.

In the second quarter, nonperforming loans at Chinese banks notched their biggest rise in more than a decade, according to research from Capital Economics. Corporate bond defaults are on the rise, and earlier this week, official reports showed Chinese investment growth, which has long been a driver of the economy, fell to its lowest level since the late 1990s.

The pressure on the Chinese economy is beginning to take its toll in other places, too. China’s currency, the renminbi, has fallen more than 9% against the dollar in the past six months, and China’s CSI 300 index of blue chip stocks is off 19% this year.

The net effect of all of this has been to dilute the predictive power of copper. Copper may no longer deserve its PhD in economics, perhaps only a master’s degree or an associate of arts.

Copper is not alone in predicting imminent economic disaster. Oil (USO) has also been shouting the same. Texas tea has fallen by 15.8% since copper began its swan dive two months ago.

For sure, oil has been falling for its own reasons. Iran has sidestepped American sanctions by selling its oil directly to China, and there is nothing the U.S. can do about it. Every year, global GDP growth needs less oil to grow than before thanks to alternative energy sources and conservation.  A recent bout of OPEC quota cheating hasn’t helped either.

As any market strategist will tell you, falling copper and oil prices are not what sustainable bull markets in stocks are made of. I’m not saying a crash will happen tomorrow.

Personally, I believe that the bull market should spill into 2019. But when corporate earnings growth downshifts from 26% to 5% YOY, as it will in Q1 2019, watch out below!

 

 

 

 

 

 

 

The Big Trade War Victim

May 25, 2018

Global Market Comments
May 25, 2018
Fiat Lux

Featured Trade:
(FRIDAY, AUGUST 3, 2018, AMSTERDAM, THE NETHERLANDS GLOBAL STRATEGY DINNER),
(MAY 23 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (SPY), (TSLA), (EEM), (USO), (NVDA),
(GILD), (GE), (PIN), (GLD), (XOM), (FCX), (VIX)

April 3, 2018

Global Market Comments
April 3, 2018
Fiat Lux

Featured Trade:
(TUESDAY, JUNE 12, NEW ORLEANS, LA, GLOBAL STRATEGY LUNCHEON),
(MARCH 28 BIWEEKLY STRATEGY WEBINAR Q&A),
(TLT), (TBT), (FXY), (GS), (FCX), (CSCO), (INTC), (NEM),
(RIGHTSIZING YOUR TRADING)

Oil: Is It Different This Time?

A reader emailed me yesterday to tell me that while visiting his daughter at a college in North Carolina, he refilled his rental car with gas for $1.39 a gallon.

So I got the idea that something really big is going on here that no one is yet seeing. I processed the possibilities in my snowshoe up to the 10,000-foot level above Lake Tahoe last night.

By the way, the view of the snow covered High Sierras under the moonlight was incredible.

For decades, I have dismissed the hopes of my environmentalist friends that alternatives will soon replace oil (USO) as our principal source of energy.

I have long agreed with the views of my fracking buddies in the Texas Barnett Shale that it will be decades before wind, solar, and biodiesel make any appreciable dent in our energy makeup.

It took 150 years to build our energy infrastructure, and you don?t replace that overnight. The current weakness in oil prices is a simple repeat of a predictable cycle that has continued for a century and a half. In a couple years, Texas tea will be posting triple digits once again.

I always thought that oil had one more super spike left in it. After that, it will fade into history, reduced to limited applications, like making plastics and asphalt, probably sometime in the 2030?s.

The price for a barrel of oil should then vaporize to $5.

But given the price action for energy and all other commodities I?m starting to wonder if this time I?m wrong.

I have watched with utter amazement while Freeport McMoRan (FCX) plunged from $38 to $3. I was gob smacked to see Linn Energy (LINE), admittedly a leveraged play, crater from $32 to 30 cents.

And I was totally befuddled to see gas major Chesapeake Energy (CHK) implode from $65 to $1.

Has the world gone mad?

When the data don?t match your view, it?s time to change your view.

Maybe there won?t be another spike in oil prices. Could its disappearance from the modern industrialized economy have already begun?

That would certainly explain a lot of the recent eye-popping price action in the markets. In five short years oil has dropped 82%. It did this while global GDP grew by 20% and auto sales, and therefore gasoline demand, has been booming.

Of course, you could just call all of this a big giant reversion to the mean.

Over the past 150 years, the average, inflation adjusted price of oil has been $35 a barrel. The price for gasoline has been $2.25 a gallon, exactly where it was in 1932, and where it now is in much of the country.

I know all of these numbers because I once did a study to see if oil prices are rigged (conclusion: they are). How can the price of a commodity stay the same for 150 years?

Wait, the naysayers announce. Things don?t happen that fast.

But they do, my friends, they do, especially in energy.

Until 1849, my ancestors were the largest producers of whale oil on Nantucket Island. (Our family name,? Coffin, was mentioned in ?Moby Dick? seven times, and was a focus of the just released film, ?In the Heart of the Sea.?)

Then this stuff called petroleum came along, wrested from the ground with new technology by men like Drake and Rockefeller. The whale oil market crashed, dropping in price by 90%, and virtually disappeared in two years.

My relatives were wiped out and moved to San Francisco, which they already knew from their whaling days, and where gold had just been found.

A half-century later, this thing called an ?automobile? came along meant to replace the ubiquitous horse and buggy. People laughed. It was loud, noisy, smelly, inefficient, and expensive. Only the rich could afford them.

You had to go to a drug store to buy high priced fuel in one-gallon tins. And it scared the horses. England passed a national automobile speed limit of 5 miles per hour, as cars were considered dangerous.

Then huge oil discoveries were made in Texas and California (watch ?There Will Be Blood?), the Hughes drill bit came along, and gasoline prices fell sharply. Suddenly cars were everywhere. The horse population declined from 100 million to only 1 million today.

All of this is a long-winded, history packed way of saving ?This time it may be different?.

I have on my desktop a Trade Alert already written up to buy the (USO) May, 2016 $9 calls. Today, they traded at $1.00. I?m just waiting for another melt down in oil to take a low risk punt on the long side.

If we rocket back up to $100, as many are predicting, these calls will be worth a fortune. But you know what, oil may only peak out at $44 this time. The trade will still make money, but not as much as in past cycles.

So, you better think hard about loading up on too many oil stocks at these distressed levels. Look what has already happened to the coal industry (KOL), which has essentially gone bankrupt.

You could well be buying into the buggy whip industry circa 1900.

FCXLINECHK$WTICHeart of the SeaThere?s Got to Be a Better Way to Make a Living

Carl Icahn Is At It Again

Many ascribe Monday?s 312 point plunge in the Dow Average to an informational webinar posted by legendary corporate raider and hedge fund manager, Carl Icahn.

I have known Carl for 30 years, and I once owned and apartment in his building on the Upper East Side of Manhattan, near Sutton Place (which I later sold for a quick double).

Even then, he was opinionated, cantankerous, and never hesitated to make the bold move. Wall Street hated him.

At 79, he is nothing less than a force of nature. Whenever I see Carl, I say I want to be like him when I grow up.

I just watched the controversial video, entitled ?Danger Ahead ? A Message From Carl Icahn?, which has ruffled more than a few feathers in the establishment. But that has always been Carl?s strong suite.

Here are the high-points:

1) We should end the ?carried interest? treatment of hedge fund profits, which lets billionaire managers get off scot-free, while sticking a big tax bill with the little guy.

2) Foreign profits of US multinationals, some $2.2 trillion, should be brought home, taxed, and put to work.

3) Corporate inversions, whereby American companies reincorporate overseas to beat taxes, should be banned.

4) Corporate share buybacks, which amount to 4.5% of the outstanding float per year, are a short-term fix for company share prices only at the long-term price of a weaker balance sheets.

5) Some $4.5 trillion in borrowing by the Federal Reserve has crowded out the little guy. On this one, I disagree with Carl. With overnight rates at zero and ten year Treasury bonds yielding 2.06%, nobody is getting crowded out from anything.

6) Artificially low interest rates are fueling an unwarranted takeover boom and encouraging risky financial engineering.

7) Junk bonds (HYG), (JNK) are a bubble begging to pop. They are the result of a runaway Wall Street selling machine that saw big firms selling short their own issues to unwary customers.

Carl sums up by saying that while the Fed saved the US economy during 2008-09, they created the problem in the first place with Greenspan?s excessive easing in 2002-03.

He believes that the candidacy of outsider Donald Trump is a natural reaction to peoples? dissatisfaction with Washington and Wall Street.

I have to admit that Carl has brought up some serious points here. I agree with all, except the above-mentioned ?crowding out? issue. Combined, they are a detrimental tax on the long-term economic health of America.

Could this be an attempt by Carl to throw his hat into the political ring? Treasury Secretary in a future Trump administration was mentioned in later media interviews.

But at his age, even for Carl, that would be a reach.

While Icahn has been ringing the alarm bell on the stock market and junk bonds all year, he has been aggressively acquiring major stakes in in the energy and commodities sectors all year, while they are trading at generational lows.

He has zeroed in on two of my own favorite trades, Freeport McMoRan (FCX) and Cheniere Energy (LNG).

Carl is also holding a major position in Apple (AAPL), which he acquired two years ago just after I jumped in at $395. He believes the shares are absurdly cheap.

To watch the 15 minute video in full, please click: http://carlicahn.com.

Good for you, Carl Icahn!

HYG 9-29-15

FCS 9-29-15

LNG 9-29-15

AAPL 9-29-15

Carl Icahn