Global Market Comments
July 25, 2018
Fiat Lux
Featured Trade:
(JOIN US AT THE MAD HEDGE LAKE TAHOE, NEVADA
CONFERENCE, OCTOBER 26-27, 2018),
(WHY YOU MISSED THE TECHNOLOGY BOOM
AND WHAT TO DO ABOUT IT NOW),
($INDU), (TLT), (GLD), (GOOGL), (FB),
(AAPL), (NVDA), (MSFT), (AMZN)
Global Market Comments
June 14, 2018
Fiat Lux
SPECIAL GOLD ISSUE
Featured Trade:
(GUESS WHO'S BEEN BUYING GOLD?),
(GLD), (GDX), (SLV), ($SSEC),
(WILL GOLD COINS SUFFER THE FATE OF THE $10,000 BILL?),
(GLD), (GDX),
(TESTIMONIAL)
Gold bugs, conspiracy theorists, and permabears had some unfamiliar company last year.
While traders, individuals, and ETFs have been unloading gold for the past five years, central banks have been steady buyers.
Who had the biggest appetite for the barbarous relic?
Russia, which has been accumulating the yellow metal to avoid economic sanctions imposed by the United States in the wake of its invasion of the Ukraine.
Hot on its heels was China, which has flipped to a large net importer of gold to meet insatiable demand from domestic investors. China appears to be buying about 20 metric tonnes a month of the barbarous relic.
It seems the Chinese stocks markets ($SSEC) were not the great trading opportunity that they were hyped to be, which plunged 30% during the first two months of 2016, and is now 60% off its all-time high.
That's a big deal in a country that has no social safety net.
Many Chinese now prefer to buy gold instead of stocks, which are now considered too risky for a personal nest egg.
They are facilitated by the ubiquitous precious metal coin stores, which have recently sprung up like mushrooms in every city.
Only a few years ago, private ownership of gold resulted in China having your organs harvested by the government.
Central bank sellers have been few and far between. Venezuela has dumped about half its reserve to head off a recurring liquidity crisis.
Middle Eastern sovereign wealth funds cashed in some chips to deal with the oil price crash.
Canada has also been selling for reasons unknown to us south of the border.
All of this poses a really interesting question. Gold fell for the four consecutive years that central banks were buying, and the rest of the world was selling.
What happens when the rest of the world flips to the buy side?
My guess is that it goes up, which is why I have issued long side Trade Alerts on gold this year.
The conspiracy theorists will love this one.
Buried deep in the bowels of the 2,000-page health care bill was a new requirement for gold dealers to file Form 1099s for all retail sales by individuals over $600.
Specifically, the measure can be found in section 9006 of the Patient Protection and Affordable Care Act of 2010.
For foreign readers unencumbered by such concerns, Internal Revenue Service Form 1099s are required to report miscellaneous income associated with services rendered by independent contractors and self-employed individuals.
The IRS has long despised the barbaric relic (GLD) as an ideal medium to make invisible large transactions. Don't you ever wonder what happened to $500, $1,000, $5,000, $10,000, and $100,000 bills of your youth?
The $100,000 bill was only used for reserve transfers among banks and was never seen by the public. The other high denomination bills were last printed in 1945 and withdrawn from circulation in 1969.
Although the Federal Reserve claims on its website that they were withdrawn because of lack of use, the word at the time was that they disappeared to clamp down on money laundering operations by the mafia.
IN FACT, THE GOAL WAS TO FLUSH OUT MONEY FROM THE REST OF US.
Dan Lungren, a republican from California's third congressional district, a rural gerrymander east of Sacramento that includes the gold bearing Sierras, has introduced legislation to repeal the requirement, claiming that it places an unaffordable burden on small business.
Even the IRS is doubtful that it can initially deal with the tidal wave of paper that the measure would create.
Currency trivia question of the day: Whose picture is engraved on the $10,000 bill? You guessed it, Salmon P. Chase, Abraham Lincoln's Secretary of the Treasury.
Ever Wonder Where The $10,000 Bill Went?
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)
Below please find subscribers' Q&A for the Mad Hedge Fund Trader May 23 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: Would you short Tesla here?
A: Tesla (TSLA) is on the verge of making the big leap to mass production, so they're in somewhat of an in-between time from a profit point of view, and the burden of proof is on them. Elon Musk is notorious for squeezing shorts. I would not want to bet him.
Musk has been successfully squeezing shorts for 10 years now, from the time the stock was at $16.50 all the way up to $392. So, I would not short Tesla. Buy the car but don't play in the stock; it's really a venture capital play that happens to have a stock listing because so many people are willing to back his vision of a carbon-free economy.
Q: What is your takeaway on the China trade war situation?
A: The Chinese said "no," and that is positive for economic growth. Anything that enhances international trade is good for growth and good for the stock market; anything that damages international trade is bad for corporate earnings and bad for the stock market. So, the China win in the trade war is essentially positive, but I don't think we'll see that reflected in stock prices until the end of the year.
Q: What do you think about Gilead Sciences?
A: I don't really want to touch Gilead (GILD), or the entire sector, for that matter. We shouldn't be seeing such a poor performance at this point in the market. Health care has been dead for a long time, and you would have expected a rally based purely on fundamentals; they are delivering good earnings, it's just not reflected in the price action of the stocks. I think with no new money going into the market, there's nothing to push up other sectors; it's really become a "technology on and off" market. Health care doesn't fit anywhere in that world.
Q: Do you still like Nvidia?
A: I love Nvidia (NVDA). The chip sector still has another year to go. Nvidia has the high value-added product, and I'm looking for $300 dollars a share sometime this year/next year. The reason the stock hasn't really been moving is that it's over-owned; too many people know about the Nvidia story, which continues to go "gangbusters," so to speak. The chairman has also put out negative comments on short-term inventories, which have been a drag.
Q: Treasuries (TLT) are over 3%. Will they go over 3.5% by then end of this year?
A: I would say yes. Since that is only 50 basis points away from the current market, I would say it's a pretty good bet. So, if you get any good entry points you can do LEAPS going out to next year, betting that Treasuries will not only be below $116 by the end of the year, but they'll probably be below 110. And that would give you a very good high return LEAP with a yield of 50% in the next, say 8 months. By the way, if the Treasury yield rises to 4% that takes the (TLT) down to $98!
Q: Any chance General Electric will be acquired this year?
A: Absolutely not. General Electric (GE) worth far more if you break it up into individual pieces and sell them. Some parts are very profitable like jet engines and Baker Hughes, while other parts, like their medical insurance exposure, are awful.
Q: What do you see about the India ETF?
A: The one I follow is the PowerShares India Portfolio ETF (PIN) and we love it long term. Short term, they can take some pain with the rest of the emerging markets.
Q: What should I do with my January 2019 Gold calls?
A: I would sell them. It's not worth hanging on to here with too many other better things to do in stocks.
Q: Would you continue to hold ExxonMobile?
A: I would not. If you were lucky enough to get in at the bottom on ExxonMobile (XOM). I would be taking profits here. I'm not sure how long this energy rally will last, especially if the global economic slowdown continues.
Q: Is Freeport-McMoRan (FCX) a buy?
A: Yes, but only buy the dip in the recent range, so you don't get stopped out when the price goes against you. Commodities are the best performing asset class this year and that should continue.
Q: How high is oil (USO) headed?
A: I think we're probably peaking out short of $80 a barrel currently unless we get a major geopolitical event. Then it could go up to $100 very quickly and trigger a recession.
Q: Are you looking to buy the Volatility Index here?
A: Buy the next dip, but the trick with (VIX) is buying after it sits on a bottom for about five days. You also want to buy it when stocks (SPY) are at the top of a range, like yesterday.
Q: How long do you think the market will be range-bound for?
A: My bet is at least three months, and possibly four or five. We should start to anticipate the outcome of the midterm congressional elections in September/October; that's when you get your upside breakout.
Q: Is Gold (GLD) not worth buying since Bitcoin has taken over market share from Gold buyers?
A: Essentially, yes. That's probably why you're not getting these big spikes in Gold like you're used to. Instead, you're getting them in Bitcoin. Bitcoin is clearly stealing Gold's thunder. That's a major reason why we haven't been chasing Gold this year.
Q: After the emerging market sell-off, is it a good time to go in?
A: No, I think the emerging market (EEM) sell-off is being created by rising interest rates and a strong dollar. I don't see that ending anytime soon. In a year let's take another look in emerging markets. By then overnight Fed funds should be at 2.50% to 2.75%.
Global Market Comments
May 24, 2018
Fiat Lux
Featured Trade:
(FRIDAY, JULY 27, 2018, ZERMATT, SWITZERLAND GLOBAL STRATEGY SEMINAR),
(ANNOUNCING THE MAD HEDGE TESTIMONIAL CONTEST),
(THE SECRET FED PLAN TO BUY GOLD),
(GLD), (GDX), (PALL), (PPLT)
Global Market Comments
May 22, 2018
Fiat Lux
Featured Trade:
(DON'T MISS THE MAY 23 GLOBAL STRATEGY WEBINAR),
(CHINA'S BIG TRADE WIN),
(SPY), (TLT), (UUP), (USO), (GLD), (SOYB),
(HOW TO USE YOUR CELL PHONE ABROAD)
My phone started ringing on Sunday afternoon as soon as the futures markets opened in Asia. The U.S. had reached agreement with China on trade and the Dow futures were up 200 points.
Had the next leg of the bull market begun? ?Was it time to buy?
I asked what were the specifics of the deal. There weren't any. I asked about generalities. Those were absent as well.
All they knew was that the U.S. was suspending threatened tariff increases in exchange for a vague Chinese promise to buy more U.S. exports over the long term.
It was in effect a big Chinese win. The development allows the Middle Kingdom to do nothing but stall for time until the next U.S. administration comes to power regardless of which party wins. The Chinese think in terms of centuries, so waiting three more years for a better negotiating backdrop is no big deal.
It vindicates my own call on how the Chinese trade war would play out. After a lot of threats and saber rattling, the administration would achieve nothing, declare victory, and go home.
Traders should NOT be buying this pop in stock prices on pain of death. All that will happen is that stocks will trade back up to the top of the recent range, and then stall out once again as we slide back into slow summer trading. In fact, all we have accomplished is to revisit last week's high in stocks.
Stocks (SPY) weren't buying this trade agreement for two seconds, nor were bonds (TLT), foreign exchange (UUP), gold (GLD), or energy (USO). Not even the agricultural markets were believing it. Soybeans (SOYB), the commodity most affected by the China trade, were up a measly 2.45%. If markets really believed something substantial was afoot they would be limit up three days in a row. I've seen this happen.
It was obvious that little was accomplished when you saw the endless parade of administration officials praising the deals merits. My half century of trading experience has taught me when someone is working so hard to sell you a bridge, you look the other way.
And here is the problem. Beyond cutting-edge technology, there's nothing that China HAS to buy from the U.S. China's largest imports are in energy and foodstuffs, both globally traded commodities.
The oil and gas coming out of America looks pretty much like the Saudi Arabian and Russian kind. U.S. energy infrastructure is already groaning at the seams as it approaches 11 million barrels a day.
To double that from current levels just to fill the trade gap with China would require a multi-decade effort financed with trillions of dollars in private capital just to produce more oil with prices at a three-year high. In other words, it isn't going to happen.
The same is true with agriculture. I doubt there is a single farmer in the country willing to risk his own money to increase production on the back of the China deal. Rainfall is a much bigger concern.
In the end, stocks will eventually rise to new highs by the end of the year, just not right now. And they will do so on the back of the prodigious earnings growth of U.S. companies, which has been expanding at a breakneck pace for nearly a decade.
It is notable that the only major index that hit new highs today was the small cap Russell 2000 (IWM) where the constituent companies essentially do NO trade with China.
To believe otherwise would be giving the cock the credit for the sun rising, which happens every morning like clockwork.
It Worked Again!
Global Market Comments
May 1, 2018
Fiat Lux
Featured Trade:
(FRIDAY, JUNE 15, 2018, DENVER, CO, GLOBAL STRATEGY LUNCHEON)
(ANATOMY OF A GREAT TRADE)
(TLT), (TBT), (SPY), (GLD), (USO),
(CYBERSECURITY IS ONLY JUST GETTING STARTED),
(PANW), (HACK), (FEYE), (CSCO), (FTNT), (JNPR), (CIBR)
