Posts

December 3, 2019

Global Market Comments
December 3, 2019
Fiat Lux

Featured Trade:

(WHY WATER WILL SOON BE WORTH MORE THAN OIL),
(CGW), (PHO), (FIW), (VE), (TTEK), (PNR), (BYND),
(WHY WARREN BUFFETT HATES GOLD),
(GLD), (GDX), (ABX), (GOLD),

Why Warren Buffet Hates Gold

After seven years in the penalty box, gold is finally starting to come alive, and the Armageddon crowd is absolutely loving it. Maybe after ten years of rising, stocks are finally expensive on a relative basis?

These are the guys who are perennially predicting the collapse of the dollar, the default of the US government, hyperinflation, and the end of the world.

Better to keep all your assets in gold and silver, store at least a year’s worth of canned food, and keep your untraceable guns well-oiled and supplied with ammo, preferably in high capacity magazines.

If you followed their advice, you lost your shirt.

I have broken many of these wayward acolytes of their money-losing habits. But not all of them. There seems to be an endless supply emanating from the hinterlands.

The “Oracle of Omaha” Warren Buffet often goes to great lengths to explain why he despises the yellow metal.

The sage doesn’t really care about the gold, whatever the price. He sees it primarily as a bet on fear. I imagine he feels the same about Bitcoin, the modern tulips of our age.

If investors are more afraid in a year than they are today, then you make money on gold. If they aren’t, then you lose money.

The only problem now is that fear ain’t working.

If you took all the gold in the world, it would form a cube 67 feet on a side, worth $5 trillion. For that same amount of money, you could own other assets with far greater productive earning power, including:

*All the farmland in the US, about 1 billion acres, which is worth $2.5 trillion.

*Four Apple’s (AAPL), the second largest capitalized company in the world at $1.2 trillion.

Instead of producing any income or dividends, gold just sits there and shines, making you feel like King Midas.

I don’t know. With the stock market at an all-time high, and oil trading at $56/barrel, a bet on fear looks pretty good to me right now.

I’m still sticking with my long-term forecast of the old inflation adjusted high of $2,300/ounce.

It is just a matter of time before emerging market central bank buying pushes it up there. And who knows? Fear might make a comeback too.

 

 

 

 

December 2, 2019

Global Market Comments
December 2, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or 2020 IS ALREADY HAPPENING),
(TSLA), (X), (GE), (FCX), (SLB), (GOOGL), (MSFT), (GLD)

October 31, 2019

Global Market Comments
October 31, 2019
Fiat Lux

Featured Trade:

(WELCOME TO THE LAND OF ZEROS),
(TLT), (VIX), (GLD), (SLV), (FXY),
(A NOTE ON OPTIONS CALLED AWAY), (BA)
(TESTIMONIAL)

October 18, 2019

Global Market Comments
October 18, 2019
Fiat Lux

Featured Trade:

(OCTOBER 16 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPX), (C), (GM), (IWM), ($RUT), (FB),
 (INTC), (AA), (BBY), (M), (RTN), (FCX), GLD)

October 17, 2019

Global Market Comments
October 17, 2019
Fiat Lux

Featured Trade:

(UPDATING THE MAD HEDGE LONG TERM MODEL PORTFOLIO),
(USO), (XLV), (CI), (CELG), (BIIB), (AMGN), (CRSP), (IBM), (PYPL), (SQ), (JPM), (BAC), (EEM), (DXJ), (FCX), (GLD)

August 29, 2019

Global Market Comments
August 29, 2019
Fiat Lux

Featured Trade:

(HOW THE MARKETS WILL PLAY OUT FOR THE REST OF 2019),
(SPY), ($INDU), (USO), (TLT), (UUP), (COPX), (GLD),
(HOW THE MAD HEDGE MARKET TIMING ALGORITHM WORKS)

How the Markets Will Play Out for the Rest of 2019

We are currently caught between a rock and a hard place.

The whims of one man will dictate whether after a brutal summer, markets recover to new all-time highs, or plunge into the depths of despair in a bear market and recession.

My bet is that the S&P 500 (SPY) will trade between the 50-day moving average at $294 and the 200-day moving average at $278. Right now, we are dead in the middle of that range.

Then on September 18, the Federal Open Market Committee convenes to deliver a decision on interest rates. I believe that no matter what the decision is, whether they cut rates or leave them unchanged, you will see another sharp selloff in stocks, possibly as much as another 2,000 Dow points. That will bring us a December 2018 repeat.

So why does falling interest rates bring cratering stock prices? For a start, you can take your traditional playbook on how markets are supposed to work and throw it in the trash. Low rates USED to bring high stock prices, but no more.

What is driving markets now is not the absolute level of interest rates today, no matter how low they may be historically. It is how many interest rate cuts are left until we get to zero. So an August 1 25-basis point rate cut meant there are fewer rate cuts in the future so a heart-stopping 2,000-point plunge in the Dow average ensued.

The same twisted logic will apply on September 18, only 16 trading days away. By the way, I plan to be 100% in cash by September 18.

Long term, the outlook gets more complicated.

If the trade war ends in September, then the stock market could rocket up to new all-time highs, surpassing 3,200 by the end of the year, up 14.2% from present levels.

If the trade war drags on, a recession is a sure thing in 12-24 months. That means a bear market in stocks is a sure thing in 6-15 months. And that assumes we are not already in a bear market. After all, the major indexes have been unable to top new highs made in January 2018.

The next bear market will likely take the indexes ($INDU) down 40%. They are, after all, the most overvalued assets in the world.

Oil (USO) will plunge to $25 a barrel. Ten-year US Treasury bond yield (TLT) will collapse to 0%, as I have long been advertising. The US dollar (UUP) leaps, deepening the recession. Commodity prices collapse (COPX) and gold (GLD) soars. We might even get into a shooting war in the South China Sea, as there will be nothing for the Beijing leadership to lose.

Again, it all depends on the whim of one man, one who has never done business in China, and who is constantly surprised by Chinese reactions to his own moves. There is no Trump Hotel in Beijing, nor one planned.

Good luck with that.

Just thought you’d like to know.

 

 

Getting Ready for Hard Times

August 12, 2019

Global Market Comments
August 12, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, or
(CYB), (FXE), (TLT), (FXY), (COPX), (USO),
(GLD), (VIX), (FXB), (IWM0, (DIS), (CRB), (FB)
(A COW BASED ECONOMICS LESSON)

The Market Outlook for the Week Ahead

So, this is what the best trading week looks like.

Investors panicked. The hot money fled in droves. Predictions of escalating trade wars, recessions, and depressions abounded.

The bottom line for followers of the Mad Hedge Fund Trader? We picked up 4.4% on the week, as may make as much next week.

A number of trading nostrums were re-proven once again. That which can’t continue, won’t. When too many people gather on one side of the canoe, it will capsize. If you execute a trade and then throw up on your shoes, you know it will be a good one. I could go on and on.

The week also highlighted another trend. That is the market has become a one-trick pony. The focus of the market is overwhelmingly on technology, the only sector that can promise double digit growth for years to come. And it’s not just technology, but a handful of large cap companies. Investing has become a matter of technology on, or technology off.

This is always how bull markets end, be it the Nifty 50 of the early 1970s, Japanese stocks of the late 1980s, or the Dotcom Bubble of the 1990s.

It was a week that ran off fast forward every day.

China retaliated against the US in the trade war and stocks dove 900 points intraday. The Middle Kingdom imposed a total ban on all US agricultural imports and took the Yuan (CYB) down to a decade low to offset tariffs.

All financial markets and asset classes are now flashing recession and bear market warnings. The Mad Hedge Market Timing Index fell from 70 to 22, the steepest drop in recent memory. The US dollar dropped sharply against the Euro (FXE) and the Japanese yen (FXY). Oil (USO) went into free fall. Copper (COPX) collapsed to a new low for the year.

The New York Fed lowered its Q3 GDP growth to a lowly 1.56%, with the Atlanta Fed pegging 1.9%. Payrolls, orders, import/export prices, and trade are shrinking across the board, all accelerated by the ramp up in the trade war. Manufacturing and retailing are going down the toilet. Sow the wind, reap the whirlwind.

The German economy (EWG) is in free fall, as most analysts expect a negative -0.1% GDP figure for Q2. The fatherland is on the brink of a recession which will certainly spill into the US. That Mercedes Benz AMG S class you’ve been eyeing is about to go on sale. Great Britain (FXB) is already there, with a Brexit-induced negative -0.2% for the quarter.

Some 50% of S&P 500 dividends now yield more than US Treasury bonds. At some point, that makes equities a screaming “BUY” in this yield-starved world, but not quite yet. Is TINA (there is no alternative to stocks) dead, or is she just on vacation?

Ten-year US Treasury bonds (TLT) hit 1.61%, down an incredible 50 basis point in three weeks. Zero rates are within range by next year. The problem is that if the US goes into the next recession at zero interest rates, there is no way to get out. A decades-long Japanese style Great Depression could ensue.

Bond giant PIMCO too says zero interest rates are coming to the US. Too bad they are six months late from my call. It’s all a matter of the US coming into line with the rest of the world. The global cash and profit glut has nowhere else to go but the US. Much of the buying is coming from abroad.

Gold (GLD) hit a six-year high, as a rolling stock market panics drive investors into “RISK OFF” trades and downside hedges. While high interest rates are the enemy of the barbarous relic, low rates are its best friend and negative rates are even better. We are rapidly approaching century lows on a global basis.

Do your Christmas shopping early this year, except do it at the jewelry store and for your portfolio. Above $1,500 an ounce gold is beating stocks this year and the old all-time high of $1,927 is in the cards.

As I expected, August is proving to be the best short selling opportunity of the year. Not only can we make money in falling markets, elevated volatility means we can get into long side plays at spectacularly low levels as well.

With the Volatility Index (VIX) over $20, it is almost impossible to lose money on option spreads. The trick was to get positions off while markets were falling so fast.

The week started out with a rude awakening, my short in the US Treasury Bond Fund rising 1 ½ points at the opening. I covered that for a tear-jerking 3.26% loss, my biggest of the year. But I also knew that making money had suddenly become like falling off a log.

I fortuitously covered all of my short positions in the S&P 500 (SPY) and the Russell 2000 (IWM) right when the Dow average was plumbing depths 2,000-2,200 points lower than the highs of only two weeks ago. Then I went aggressively long technology with very short dated August plays in Walt Disney (DIS), Salesforce (CRM), and Facebook (FB).

My Global Trading Dispatch has hit a new all-time high of 324.78% and my year-to-date shot up to +24.68%. My ten-year average annualized profit bobbed up to +33.60%. 

I coined a blockbuster 6.31% so far in August. In a mere three weeks I shot out 12 Trade Alerts, 11 of which made money, bringing in a 10% profit net of the one-bond loss. All of you people who just subscribed in June and July are looking like geniuses.

The coming week will be a snore on the data front. Believe it or not, it could be quiet.

On Monday, August 12 at 11:00 AM EST, the Consumer Inflation Expectations for July are released.

On Tuesday, August 13 at 8:30 AM US Core Inflation for July is published.

On Wednesday, August 14, at 10:30 the IEA Crude Oil Stocks are announced for the previous week.

On Thursday, August 15 at 8:30 AM EST, the Weekly Jobless Claims are printed. At 9:15 we learn July Industrial Production.

On Friday, August 16 at 8:30 AM, the July Housing Starts are out.

The Baker Hughes Rig Count follows at 2:00 PM.

As for me, I’ll be headed to the Land’s End Music Festival in San Francisco this weekend and listen to many of the local rock groups. Hopefully, I will be able to unwind from the stress and volatility of the week.

Good luck and good trading.

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

 

 

 

 

 

 

 

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