(FXE) Archives - Page 12 of 19 - Mad Hedge Fund Trader

The Market Outlook for the Week Ahead, or It’s Fed Week

20/20 hindsight is a wonderful thing, especially when all of your predictions come true.

In February, I announced that markets would trade in broad ranges until the run-up to the midterm elections. That is what has happened to a tee, with the decisive upside breakout taking place last week. From here on. You’re trying to buy dips for a year-end run-up to higher highs.

For many months I was the sole voice in the darkness crying out that the bull market was still alive, it was just resting. Now quality laggards are taking the lead, such as in Industrials (XLI), Health Care (XLV), Consumer Staples (XLP), and Consumer Discretionary (XLY).

Home Depot (HD), which I recommended a month ago has taken off for the races, as has competitor Lowes (LOW), thanks to a twin hurricane boost. Even the long dead banks have recently showed a pulse (MS), (GS).

Technology stocks are taking a long-needed rest after a torrid two-and-a-half-year run. But they’ll be back. They always come back.

It’s not only stocks that have broken out of ranges, so has the bond market (TLT), the U.S. dollar (UUP), and foreign currencies (FXE). Will commodity companies like Freeport-McMoRan (FCX) and emerging markets (EEM) be the last to pick themselves off the mat, or do they really need to see the end of the trade wars first?

Markets are essentially acting like the trade war is over and we won. Why would traders believe this? That’s what a Volatility Index touching $11 tells you and is why I have been telling them to avoid buying it all week. Because the president told them so.

Another not insignificant positive is that multinationals have been slow to repatriate foreign funds, so there is a lot more still abroad to buy back their own stocks.

Weekly jobless claims hit another half century low at 201,000. Major U.S. companies such as UPS (UPS) and Target (TGT) are planning record levels of Christmas hiring. By the way, this is what economic peaks look like.

The Senate passes a mini spending bill that keeps the government from shutting down until December 7. The budget deficit keeps on soaring, but apparently, I am the only one who cares. Live through a debt crisis like we had during the early 1980s and you’d feel the same way.

The data for housing continues to be terrible, and we saw our first increase in inventories in three years.

Finally, with people camping out overnight and lines around the block, Apple’s CEO Tim Cook opens the doors to the Palo Alto, CA, store at 9:00 AM sharp on Friday to three new phones. But did the stock peak at $230, as it has in past release cycles?

Last week, the performance of the Mad Hedge Fund Trader Alert Service forged a new all-time high and then gave it up on one bad trade. September is now unchanged at -0.32%. My 2018 year-to-date performance has retreated to 26.69%, and my trailing one-year return stands at 38.23%.

My nine-year return appreciated to 303.16%. The average annualized Return stands at 34.32%. I hope you all feel like you’re getting your money’s worth.

This coming week is all about the Fed, plus a plethora of housing data.

On Monday, September 24, at 10:30 AM, we learn the August Dallas Fed Manufacturing Survey.

On Tuesday, September 25, at 9:00 AM, the new S&P Corelogic Case-Shiller National Home Price Index for July, a three-month lagging indicator.

On Wednesday September 26, at 10:00 AM, the August New Home Sales is published. At 2:00 the Fed Open Market Committee announced its decision to raise interest rates by 25 basis points.

Thursday, September 27 leads with the Weekly Jobless Claims at 8:30 AM EST, which dropped 3,000 last week to 201,000, a new 43-year low. At the same time an update on Q2 GDP is published.

On Friday, September 28, at 9:45 AM, we learn the August Chicago Purchasing Managers Index. The Baker Hughes Rig Count is announced at 1:00 PM EST.

As for me,

Good luck and good trading.

The Market Outlook for the Week Ahead, or Coming Home to Trouble

Diary, Newsletter, Research

Ho Hum. Another week, another financial crisis. And why did I rush back from the bucolic mountain pastures of Zermatt? To come back to the smoke-laden skies from the Northern California forest fires? It all must be an early sign of dementia.

Trump's foreign policy now seems crystal clear; to destroy the economies of all our allies. That's what he accomplished with NATO member Turkey today by doubling tariffs, triggering an instant 20% devaluation of the Turkish Lira. Turkey has been at war with Russia for 600 years.

Most Turkish companies have their debts in U.S. dollars or Euros (FXE), so you can write them off. That puts European banks at risk of another crisis, which could quickly turn global in nature. The flip side of this move was to take the U.S. dollar (UUP) to a new high for the year, thus crushing our own exporters even further.

Did our stock market care? Well. Actually yes, taking the Dow Average down 300 points. Will it care more than today? Probably not. All we are seeing is profit taking in some of the most overbought high fliers.

That is, unless, you are a soybean farmer, who saw prices collapse yet again. I watch bean prices closely these days, as it is an indicator of the market's expectation of intensifying trade wars.

After four decades of efforts to develop the Chinese markets, those efforts are going up in flames. And that business is not coming back now that the U.S. has proved itself an unreliable partner. As anyone in business will tell you, you only get to offend a customer once.

Markets generally believe that the U.S. trade war against the rest of the world is nothing more than a negotiating ploy. If that is not the case and they go on and on, you can move up the next recession and bear market by a year, like to tomorrow.

Perhaps the most important news of the week was the July Consumer Price Index leaping to 2.9%, a decade high. This is on the heels of the 2.7% pop in Average Hourly Earnings that came with the July Nonfarm Payroll Report.

Yes, ladies and gentlemen, this is called inflation. And while bonds normally get destroyed by such a data point, fixed income markets instead decided to focus on the strong U.S. dollar.

That was enough to entice me to sell short the U.S. Treasury bonds (TLT) for the first time in three months. With the Fed raising interest rates on September 25 by 25 basis points, what could go wrong?

Tesla (TSLA) sucked a lot of the air out of the room this week with its mooted buyout at $420 a share. I think it will happen. There is a global capital glut right now, with trillions of dollars of capital looking for a home. Ownership of Tesla would be a great hedge for Saudi Arabia against falling oil prices, which already owns 4% of the company. And guess who the world's largest per capita buyer of Tesla's is? Norway, which has a $1 trillion sovereign wealth fund of its own. The proposed $82 billion price tag for Tesla would look like pennies on the dollar.

Tip toeing back into the market with two cautious positions has boosted my August performance to 1.32%. My 2018 year-to-date performance has clawed its way up to 26.14% and my nine-year return appreciated to 302.61%. The Averaged Annualized Return stands at 34.91%. The more narrowly focused Mad Hedge Technology Fund Trade Alert performance is annualizing now at an impressive 32.24%.

This coming week will be a very boring week on the data front.

On Monday, August 13, there will be nothing of note to report. It will just be another boring summer day.

On Tuesday, August 14, at 6:00 AM EST, we get the weekly NFIB Small Business Optimism Report.

On Wednesday, August 15, at 9:15 AM, we learn July Industrial Production.

Thursday, August 16, leads with the Weekly Jobless Claims at 8:30 AM EST, which saw a fall of 13,000 last week to 222,000. Also announced are July Housing Starts. At 4:30 PM, we learn the July Money Supply, which we might have to start paying attention to, now that inflation is on the rise.

On Friday, August 17, at 10:00 AM EST, we get Leading Economic Indicators. Then the Baker Hughes Rig Count is announced at 1:00 PM EST.

As for me, I will be stuck indoors this weekend and the government has warned me not to go outside unless absolutely necessary because the air quality is so bad. Maybe I can sneak out to Costco at some point to replenish my empty refrigerator.

Good luck and good trading.

August 10, 2018

Diary, Newsletter, Summary

Global Market Comments
August 10, 2018
Fiat Lux

Featured Trade:
(AUGUST 8 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (TBT), (PIN), (ISRG), (EDIT), (MU), (LRCX), (NVDA),
(FXE), (FXA), (FXY), (BOTZ), (VALE), (TSLA), (AMZN),
(THE DEATH OF THE CAR),
(GM), (F), (TSLA), (GOOG), (AAPL)

August 8 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers' Q&A for the Mad Hedge Fund Trader August 8 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.

As usual, every asset class long and short was covered. You are certainly an inquisitive lot, and keep those questions coming!

Q: What should I do about my (SPY) $290-295 put spread?

A: That is fairly close to the money, so it is a high-risk trade. If you feel like carrying a lot of risk, keep it. If you want to sleep better at night, I would get out on the next dip. The market has 100 reasons to go down and two to go up, the possible end of trade wars and continuing excess global liquidity, and the market is focusing on the two for now.

Q: What are your thoughts on the ProShares Ultra Short Treasury Bond Fund (TBT)?

A: Short term, it's a sell. Long term it's a buy. It's possible we could get a breakout in the bond market here, at the 3% yield level. If that happens, you could get another five points quickly in the TBT. J.P. Morgan's Jamie Diamond thinks we could hit a 5% yield in a year. I think that's high but we are definitely headed in that direction.

Q: What are your thoughts on the India ETF (PIN)?

A: It goes higher. It's been the best-performing emerging market, and a major hedge fund long for the last five years. The basic story is that India is the next China. Indicia is the next big infrastructure build-out. Once India gets regulatory issues out of the way, look for more continued performance.

Q: What are your thoughts on Intuitive Surgical (ISRG)?

A: Intuitive is a kind of microcosm in the market right now. It's trading well above a significant support level, which happens to be $508. I don't typically like Intuitive Surgical stock because the options are very inefficient, and therefore very pricey. I think, at this point, there is a bigger possibility of it breaking down than continuing to head higher. In other words, it's overbought. Buy long term, the sector has a giant tailwind behind it with 80 million retiring baby boomers.

Q: What are your thoughts on the entire chip sector, including Micron (MU), Lam Research (LRCX) and NVIDIA (NVDA)?

A: NVIDIA is the top of the value chain in the entire sector, and it looks like it wants to break to a new high. My target is $300 by the end of the year, from the current $240s. I think the same will happen with Lam Research (LRCX), which just had a massive rally. All three of these have major China businesses; China buys 80% of its chips from the U.S. You can do these in order in the value chain; the lowest value-added company is Micron, followed by Lam Research, followed by NVIDIA, and the performance reflects all of that. So, I think until we get out of the trade wars, Micron will be mired down here. Once it ends, look for it to get a very sharp upside move. Lam is already starting to make its move and so is NVIDIA. Long term, Lam and NVIDIA have doubles in them, so it's not a bad place to buy right here.

Q: You once recommended the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) which is now down 10%, one of your few misses. Keep or sell?

A: Keep. It's had the same correction as the rest of Technology. All corrections in Technology are short term in nature--the long-term bull story is still there. (BOTZ) is a huge play on artificial intelligence and automation, so that is going to be with us for a long time, it's just enduring a temporary short-term correction right now, and I would keep it.

Q: What do you have to say about the CRISPR stocks like Editas Medicine Inc. (EDIT)?

A: The whole sector got slammed by a single report that said CRISPR causes cancer, which is complete nonsense. So, I would use this sell-off to increase your current positions. I certainly wouldn't be selling down here.

Q: What could soften the strong dollar?

A: Only one thing: a recession in the U.S. and an end to the interest-raising cycle, which is at least a year off, maybe two. Keep buying the U.S. dollar and selling the currencies (FXE), (FXY), (FXA) until then.

Q: What are your thoughts on Baidu and Alibaba?

A: I thought China tech would get dragged down by the trade wars, but they behaved just as well as our tech companies, so I'd be buying them on dips here. Again, if we do win the trade wars, these Chinese tech companies could rocket. The fundamental stories for all of them is fantastic anyway, so it's a good long-term hold.

Q: Have you looked at Companhia Vale do Rio Doce (VALE)? (A major iron ore producer)

A: No, I've kind of ignored commodities all this year, because it's such a terrible place to be. If we had a red-hot economy, globally you would want to own commodities, but as long as the recovery now is limited to only the U.S., it's not enough to keep the commodity space going. So, I would take your profits up here.

Q: With Tesla (TSLA) up $100 in two weeks should I sell?

A: Absolute. If the $420 buyout goes through you have $40 of upside. If it doesn't, you have $140 of downside. It's a risk/reward that drives like a Ford Pinto.

Q: How long will it take global QE (quantitative easing) to unwind?

A: At least 10 years. While we ended our QE four years ago, Europe and Japan are still continuing theirs. That's why stocks keep going up and bonds won't go down. There is too much cash in the world to sell anything.

Q: Apple (AAPL)won the race to be the first $1 trillion company. Who will win the race to be the first $2 trillion company?

A: No doubt it is will be Amazon (AMZN). It has a half dozen major sectors that are growing gangbusters, like Amazon Web Services. Food and health care are big targets going forward. They could also buy one of the big ticket selling companies to get into that business, like Ticketmaster.

Good Luck and Good trading
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

July 17, 2018

Diary, Newsletter

Global Market Comments
July 17, 2018
Fiat Lux

(WHERE THE ECONOMIST "BIG MAC" INDEX FINDS CURRENCY VALUE),
(FXF), (FXE), (FXA), (FXY), (CYB),
(CATCHING UP WITH DOWNTON ABBEY),
(TESTIMONIAL)

June 25, 2018

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Global Market Comments
June 25, 2018
Fiat Lux

Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, OR IS THIS A 1999 REPLAY?),
(AAPL), (FB), (NFLX), (AMZN), (GE), (WBT),
(JOIN ME ON THE QUEEN MARY 2 FOR MY JULY 11, 2018 SEMINAR AT SEA),
(JUNE 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(SQ), (PANW), (FEYE), (FB), (LRCX), (BABA), (MOMO), (IQ), (BIDU), (AMD), (MSFT), (EDIT), (NTLA), Bitcoin, (FXE), (SPY), (SPX)

June 20 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers' Q&A for the Mad Hedge Fund Trader June 20 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader.

As usual, every asset class long and short was covered. You are certainly an inquisitive lot, and keep those questions coming!

Q: What are your thoughts on Square (SQ) as a credit spread or buyout proposition?

A: I love Square long term, and I think there's another double in it. They were a takeover target, but now the stock's getting so expensive it may not be worth it. So, Square is a buy. However, look for a summer sell-off to get into a new position.

Q: The FANGs feel a little bubbly here; will they pull back on a market dip?

A: Yes, my entire portfolio of FANG options is designed to expire on the July 20th expiration. In fact, I may even come out before then as we reach the maximum profit point on these option call spreads. Then look for a summer meltdown to get back in. The FANGs could double from here. If I am wrong they will just continue to go straight up.

Q: Palo Alto Networks (PANW) has a new CEO; are you concerned?

A: Absolutely not, I love Palo Alto networks, as well as the (FEYE) FireEye. It's just a question of getting in at the right price. It's one of the many ballistic stocks in Tech this year that we've been recommending for a long time. Hacking an online theft is never going to go out of style.

Q: Is it time to sell Facebook (FB)?

A: Yes, if you're a trader. No, if you're a long-term investor. There's another double in it. You're going to have natural profit taking on all of these Techs for the short-term, and possibly for the summer, because they've just had enormous runs. If you aren't in the FANGs this year, you basically don't have any performance because almost all of the rest of the market has gone down.

Q: What are your thoughts on Lam Research (LRCX)?

A: The whole chip sector has had two big sell-offs this year because of their China exposure and the trade wars. Expect more to come. China gets 80% of their chips from the U.S. This is normal at the end of a 10-year bull market. It's also normal when a sector transitions from highly cyclical to secular, which is what's happening in the chip sector. Twice the volatility gets you twice the returns.

Q: Would you stay away from Chinese stocks like Alibaba (BABA), Momo Inc.(MOMO), IQ (IQ), and Baidu (BIDU)?

A: I have stayed away because of the trade war fears, and it was the completely wrong thing to do, because they've gone up as much as our Tech stocks, except for the last week. So yes, I would be buying dips on these big Chinese Tech stocks, because they are drinking the same Kool Aid as our Techs, and it's working.

Q: I hear that short selling of volatility is coming back; is that a good thing?

A: Actually, it is a good thing, because it creates buyers on these dips when you had no short sellers left. The entire industry got wiped out in February creating $8 billion in losses. There was no one left to cover those shorts and support the market. Of course, the result was we got a lower low down here because of that. It's always better to have a two-way market to get a real price. Now professionals are sneaking back in on the short side, which is as it should be. This should never have been a retail product.

Q: Why are international markets so disconnected from the U.S.? Many Asian markets are down heavily while the U.S. are up.

A: The U.S. stock market benefits from a rising dollar and rising interest rates, whereas international markets suffer. When you have weak currencies in the emerging markets, people sell their stocks to avoid the currency hit, and that takes the emerging markets down massively. A lot of emerging market companies have their debts denominated in U.S. dollars, so they get killed by a strong greenback. Also, the emerging markets make a lot of money selling goods into China, so when the Chinese economy gets attacked by the U.S. and growth slows, it has the byproduct of attacking all our other allies in Southeast Asia.

Q: Is it a good idea to sell everything for the summer and just de-risk for my portfolio?

A: That's what I'm doing. Summer trading is usually horrible, and now we're going into the summer at close to a high for the year, with a terrible political backdrop and possible economic growth peaking right here. So, yes, it's a good time to sit back, count your money, and maybe even spend some of it on a European vacation.

Q: When do you think the yield curve will invert?

A: In a year, and that is typically when you get a peaking of economic growth and the stock market.

Q: Is the Fed's faster-than-expected desire to raise rates good for equities, or will investors likely sell this news as quantitative tightening continues?

A: Short-term they will buy the market on rising rates, they always do at the early part of an interest rate rising cycle. They sell stocks when you get to the middle or the end of a rate rising cycle.

Q: Do you think large Tech stocks are expensive here?

A: No, I think the Large-Cap Tech stocks can potentially double here. It can take another year to year and a half to do it, and if they don't do it in this cycle they will certainly do it in the next one, after the next recession in the 2020s. So, long term you want to think FANG, FANG, FANG, TECH, TECH, TECH. You really shouldn't have anything else in the long term, except for maybe Biotech, where you can now get in at a multiyear low.

Q: Can I buy a chip company like Advanced Micro Devices (AMD), or should I buy a cloud company, like Microsoft (MSFT)?

A: I would go with the Cloud company. The innovation there is incredible. Cloud is growing like the Internet itself was growing on its own in 1995, and with chip stocks like (AMD), you're going to get much higher volatility, but more gain. So, pick your poison. But I would go with the Cloud plays.

Q: Can we watch the recorded version of this webinar later?

A: Yes, we post the webinar on our website a couple hours later, if you're a paid subscriber.

Q: What about the CRISPR stocks?

A: They are a screaming buy right now, buy Editas Medicine (EDIT) and Intellia Therapeutics (NTLA) on the dip. The paper that triggered the sell-off saying that CRISPR causes cancer is complete BS.

Q: Only 30 million in Bitcoin was stolen in South Korea so will that still have an impact?

A: Yes, but there have been countless other hacks this year and the total loss is well over $500 million. In addition, Bitcoin is now down 70% from its December top so not all is well in cryptocurrency land.

Q: Should we expect any Trade Alerts before August 8?

A: Yes, some of my best trades have been done while only vacation. I once sold short the Euro (FXE) from the back of a camel in Morocco. Another time, I bought the S&P 500 (SPY) while hanging from a cliff face on the Matterhorn. Both of those made good money.

Q: Will the S&P 500 reach new highs before the end of the year?

A: Yes, once you get the election out of the way, that removes a huge amount of uncertainty from the market. If we could end our trade war before then, I think you're looking at another 10-15% in gains from this level by the end of the year. That takes you to an (SPX) of 3,100 by the end of 2018, which was my January 1 prediction.

Q: What does all the heavy mergers and acquisition activity mean for the market?

A: It means fewer stocks are left to trade. Stock shortages leads to higher prices, always, so it is a big market positive this year

Good Luck and Good Trading.

John Thomas
CEO and Publisher
The Diary of a Mad Hedge Fund Trader

Italy's Big Wake-Up Call

Diary, Newsletter, Research

Those planning a European vacation this summer just received a big gift from the people of Italy.

Since April, the Euro (FXE) has fallen by 10%. That $1,000 Florence hotel suite now costs only $900. Mille grazie!

You can blame the political instability on the Home of Caesar, which has not had a functioning government since March. The big fear is that the extreme left would form a coalition government with the extreme right that could lead to its departure from the European Community and the Euro. Think of it as Bernie Sanders joining Donald Trump!

In fact, Italy has had 61 different governments since WWII. It changes administrations like I change luxury cars, about once a year. Welcome to European debt crisis part 27.

I can't remember the last time markets cared about what happened in Europe. It was probably the first Greek debt crisis in 2011. This month, 10-year Italian bond yields have rocketed from 1% to 3%. But they care today, big time.

Given the reaction of the global financial markets, you could have been forgiven for thinking that the world had just ended.

U.S. Treasury Bond yields (TLT) saw their biggest plunge in years, off 15 basis points to 2.75%. The Dow Average ($INDU) collapsed by $500 to $24,250, with interest sensitive banks such J.P. Morgan Chase (JPM) and Bank of America (BAC) delivering the worst performance of the day.

Even oil prices collapsed for an entirely separate set of reasons - so far, the best performing commodity of 2018. The price of Texas Tea pared 10% in a week.

Saudi Arabia looks like it is about to abandon the wildly successful OPEC production quotas that have been boosting oil prices for the past year, and there are concerns that Iran will withdraw from the nuclear non-proliferation treaty. The geopolitical premium is back with a vengeance.

So, if the Italian developments are a canard why are we REALLY going down?

You're not going to like the answer.

It turns out that rising inflation, interest rates, oil and commodity prices, the U.S. dollar, U.S. national debt, budget deficits, and stagnant wage growth are a TERRIBLE backdrop for risk in general and stocks specifically. And this is all happening with the major indexes at the top end of recent ranges.

In other words, it was an accident waiting to happen.

Traders are extremely nervous, global uncertainty is high, the seasonals are awful, and Washington is s ticking time bomb. If you were wondering why I was issuing so few Trade Alerts in May these are the reasons.

This all confirms my expectation that markets will remain in increasingly narrow trading ranges for the next six months until the mid-term congressional elections.

Which is creating opportunities.

If you hated bonds at a 3.12% yield from two weeks ago, you absolutely have to despise them at 2.75% today. That's why I added outright bond put options today to my model trading portfolio.

Stocks are still wildly overvalued for the short term, so I'll keep my short position there. As for oil (USO), gold (GLD), and the currencies, I don't want to touch them here.

So watch for those coming Trade Alerts. I'm not dead yet, just resting.

Waiting for My Shot

May 15, 2018

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Global Market Comments
May 15, 2018
Fiat Lux

Featured Trade:
(FRIDAY, JUNE 15, 2018, DENVER, CO, GLOBAL STRATEGY LUNCHEON)
(GET READY FOR THE COMING GOLDEN AGE),
(SPY), (INDU), (FXE), (FXY), (UNG), (EEM), (USO),
(TLT), (NSANY), (TSLA)

Get Ready for the Coming Golden Age

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I believe that the global economy is setting up for a new golden age reminiscent of the one the United States enjoyed during the 1950s, and which I still remember fondly.

This is not some pie in the sky prediction. It simply assumes a continuation of existing trends in demographics, technology, politics, and economics. The implications for your investment portfolio will be huge.

What I call "intergenerational arbitrage" will be the principal impetus. The main reason that we are now enduring two "lost decades" of economic growth is that 80 million baby boomers are retiring to be followed by only 65 million "Gen Xers."

When the majority of the population is in retirement mode, it means that there are fewer buyers of real estate, home appliances, and "RISK ON" assets such as equities, and more buyers of assisted living facilities, health care, and "RISK OFF" assets such as bonds.

The net result of this is slower economic growth, higher budget deficits, a weak currency, and registered investment advisors who have distilled their practices down to only municipal bond sales.

Fast forward six years when the reverse happens and the baby boomers are out of the economy, worried about whether their diapers get changed on time or if their favorite flavor of Ensure is in stock at the nursing home.

That is when you have 65 million Gen Xers being chased by 85 million of the "millennial" generation trying to buy their assets.

By then we will not have built new homes in appreciable numbers for 20 years and a severe scarcity of housing hits. Residential real estate prices will soar. Labor shortages will force wage hikes.

The middle-class standard of living will reverse a then 40-year decline. Annual GDP growth will return from the current subdued 2% rate to near the torrid 4% seen during the 1990s.

The stock market rockets in this scenario. Share prices may rise very gradually for the rest of the teens as long as tepid 2% growth persists. A 5% annual gain takes the Dow to 28,000 by 2019.

After that, after a brief dip, we could see the same fourfold return we saw during the Clinton administration, taking the Dow to 100,000 by 2030. If I'm wrong, it will hit 200,000 instead.

Emerging stock markets (EEM) with much higher growth rates do far better.

This is not just a demographic story. The next 20 years should bring a fundamental restructuring of our energy infrastructure as well.

The 100-year supply of natural gas (UNG) we have recently discovered through the new "fracking" technology will finally make it to end users, replacing coal (KOL) and oil (USO). Fracking applied to oilfields is also unlocking vast new supplies.

Since 1995, the United States Geological Survey estimate of recoverable reserves has ballooned from 150 million barrels to 8 billion. OPEC's share of global reserves is collapsing.

This is all happening while automobile efficiencies are rapidly improving and the use of public transportation soars.

Mileage for the average U.S. car has jumped from 23 to 24.7 miles per gallon in the past couple of years, and the administration is targeting 50 mpg by 2025. Total gasoline consumption is now at a five-year low.

Alternative energy technologies will also contribute in an important way in states such as California, accounting for 30% of total electric power generation by 2020, and 50% by 2030.

I now have an all-electric garage, with a Nissan Leaf (NSANY) for local errands and a Tesla Model S-1 (TSLA) for longer trips, allowing me to disappear from the gasoline market completely. Millions will follow. The net result of all of this is lower energy prices for everyone.

It will also flip the U.S. from a net importer to an exporter of energy, with hugely positive implications for America's balance of payments. Eliminating our largest import and adding an important export is very dollar bullish for the long term.

That sets up a multiyear short for the world's big energy consuming currencies, especially the Japanese yen (FXY) and the Euro (FXE). A strong greenback further reinforces the bull case for stocks.

Accelerating technology will bring another continuing positive. Of course, it's great to have new toys to play with on the weekends, send out Facebook photos to the family, and edit your own home videos.

But at the enterprise level this is enabling speedy improvements in productivity that are filtering down to every business in the U.S., lowering costs everywhere.

This is why corporate earnings have been outperforming the economy as a whole by a large margin.

Profit margins are at an all-time high. Living near booming Silicon Valley, I can tell you that there are thousands of new technologies and business models that you have never heard of under development.

When the winners emerge, they will have a big cross-leveraged effect on economy.

New health care breakthroughs will make serious disease a thing of the past, which are also being spearheaded in the San Francisco Bay area.

This is because the Golden State thumbed its nose at the federal government 10 years ago when the stem cell research ban was implemented. It raised $3 billion through a bond issue to fund its own research, even though it couldn't afford it.

I tell my kids they will never be afflicted by my maladies. When they get cancer in 20 years they will just go down to Wal-Mart and buy a bottle of cancer pills for $5, and it will be gone by Friday.

What is this worth to the global economy? Oh, about $2 trillion a year, or 4% of GDP. Who is overwhelmingly in the driver's seat on these innovations? The USA.

There is a political element to the new golden age as well. Gridlock in Washington can't last forever. Eventually, one side or another will prevail with a clear majority.

This will allow the government to push through needed long-term structural reforms, the solution of which everyone agrees on now, but for which nobody wants to be blamed.

That means raising the retirement age from 66 to 70 where it belongs and means-testing recipients. Billionaires don't need the maximum $30,156 annual supplement. Nor do I.

The ending of our foreign wars and the elimination of extravagant unneeded weapons systems cuts defense spending from $800 billion a year to $400 billion, or back to the 2000, pre-9/11 level. Guess what happens when we cut defense spending? So does everyone else.

I can tell you from personal experience that staying friendly with someone is far cheaper than blowing them up.

A Pax Americana would ensue.

That means China will have to defend its own oil supply, instead of relying on us to do it for them. That's why they have recently bought a second used aircraft carrier. The Middle East is now their headache.

The national debt then comes under control, and we don't end up like Greece.

The long-awaited Treasury bond (TLT) crash never happens. The Fed has already told us as much by indicating that the Federal Reserve will only raise interest rates at an infinitesimally slow rate of 25 basis points a quarter.

Sure, this is all very long-term, over-the-horizon stuff. You can expect the financial markets to start discounting a few years hence, even though the main drivers won't kick in for another decade.

But some individual industries and companies will start to discount this rosy scenario now.

Perhaps this is what the nonstop rally in stocks since 2009 has been trying to tell us.

Dow Average 1908-2018

Another American Golden Age is Coming

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