Tag Archive for: ($INDU)

MHFTR

Bidding More for the Stars

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The stock market has turned into the real estate market, where everyone is afraid to sell their shares for fear of being unable to find a replacement. Will it next turn into the Bitcoin market?

Risk assets everywhere are now facing a good news glut.

My 2019 market top target of 28,000 for the Dow Average is rushing forward with reckless abandon.

Today's price action really gives you the feeling of an approaching short-term blow-off market top.

A few years ago, I went to a charity fundraiser at San Francisco's priciest jewelry store, Shreve & Co., where the well-heeled men bid for dates with the local high society beauties, dripping in diamonds and Channel No. 5.

Amply fueled with champagne, I jumped into a spirited bidding war over one of the Bay Area's premier hotties, whom shall remain nameless. Suffice to say, she is now married to a tech titan and has a sports stadium named after her.

Obviously, I didn't work hard enough.

The bids soared to $23,000, $24,000, $25,000.

After all, it was for a good cause. But when it hit $26,000, I suddenly developed a severe case of lockjaw.

Later, the sheepish winner with a severe case of buyer’s remorse came to me and offered his date back to me for $24,000.  I said, “No thanks.” He then implored, “$23,000, $22,000, $21,000?"

I passed.

The altitude of the stock market right now reminds me of that evening.

If you rode the S&P 500 (SPX) from 667 to 2,790 and the Dow Average (INDU) from 7,000 to 25,790, why sweat trying to eke out a few more basis points, especially when the risk/reward ratio sucks so badly, as it does now?

Here we are eight months into the year, and my top picks for the year have gone ballistic. Amazon (AMZN) has doubled off its February low of $1,000, and Apple (AAPL) shares have soared from $150 to $217. Today, an analyst raised his forecast to $245.

As my late mentor, Morgan Stanley’s Barton Biggs, always used to tell me, “Always leave the last 10% for the next guy.”

I realize that many of you are not hedge fund managers, and that running a prop desk, mutual fund, 401k, pension fund, or day trading account has its own demands.

But let me quote what my favorite Chinese general, Deng Xiaoping, once told me: "There is a time to fish, and a time to hang your nets out to dry.

You don't have to chase every trade.

At least then I'll have plenty of dry powder for when the window of opportunity reopens for business. So, while I'm mending my nets, I'll be building new lists of trades for you to strap on when the sun, moon, and stars align once again.

 

 

 

 

 

 

What Am I Bid?

MHFTR

August 23, 2018

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Global Market Comments
August 23, 2018
Fiat Lux

Featured Trade:
(WHY THE DOW IS GOING TO 120,000),
(X), (IBM), (GM), (MSFT), (INTC), (DELL),
($INDU), (NFLX), (AMZN), (AAPL), (GOOGL),
(THE MAD HEDGE CONCIERGE SERVICE HAS AN OPENING),
(TESTIMONIAL)

MHFTR

Why the Dow is Going to 120,000

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For years, I have been predicting that a new Golden Age was setting up for America, a repeat of the Roaring Twenties. The response I received was that I was a permabull, a nut job, or a conman simply trying to sell more newsletters.

Now some strategists are finally starting to agree with me. They too are recognizing that a ganging up of three generations of investment preferences will combine to drive markets higher during the 2020s, much higher.

How high are we talking? How about a Dow Average of 120,000 by 2030, up another 465% from here? That is a 20-fold gain from the March 2009 bottom.

It’s all about demographics, which are creating an epic structural shortage of stocks. I’m talking about the 80 million Baby Boomers, 65 million from Generation X, and now 85 million Millennials. Add the three generations together and you end up with a staggering 230 million investors chasing stocks, the most in history, perhaps by a factor of two.

Oh, and by the way, the number of shares out there to buy is actually shrinking, thanks to a record $1 trillion in corporate stock buybacks.

I’m not talking pie in the sky stuff here. Such ballistic moves have happened many times in history. And I am not talking about the 17th century tulip bubble. They have happened in my lifetime. From August 1982 until April 2000 the Dow Average rose, you guessed it, exactly 20 times, from 600 to 12,000, when the Dotcom bubble popped.

What have the Millennials been buying? I know many, like my kids, their friends, and the many new Millennials who have recently been subscribing to the Diary of a Mad Hedge Fund Trader. Yes, it seems you can learn new tricks from an old dog. But they are a different kind of investor.

Like all of us, they buy companies they know, work for, and are comfortable with. During my Dad’s generation that meant loading your portfolio with U.S. Steel (X), IBM (IBM), and General Motors (GM).

For my generation that meant buying Microsoft (MSFT), Intel (INTC), and Dell Computer (DELL).

For Millennials that means focusing on Netflix (NFLX), Amazon (AMZN), Apple (AAPL), and Alphabet (GOOGL).

That’s why these four stocks account for some 40% of this year’s 7% gain. Oh yes, and they bought a few Bitcoin along the way too, to their eternal grief.

There is one catch to this hyper-bullish scenario. Somewhere on the way to the next market apex at Dow 120,000 in 2030 we need to squeeze in a recession. That is increasingly becoming a topic of market discussion.

The consensus now is that an impending inverted yield curve will force a recession sometime between August 2019 to August 2020. Throwing fat on the fire will be a one-time only tax break and deficit spending that burns out sometime in 2019. These will be a major factor in U.S. corporate earnings growth dramatically slowing down from 26% today to 5% next year.

Bear markets in stocks historically precede recessions by an average of seven months so that puts the next peak in top prices taking place between February 2019 to February 2020.

When I get a better read on precise dates and market levels, you’ll be the first to know.

To read my full research piece on the topic please click here to read “Get Ready for the Coming Golden Age.” 

 

 

Dow 1982-2000 Up 20 Times in 18 Years

 

 

Dow 2009-Today Up 4.3 Times in 9 Years So Far

 

MHFTR

July 25, 2018

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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)

MHFTR

June 28, 2018

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Global Market Comments
June 28, 2018
Fiat Lux

Featured Trade:
(FRIDAY, AUGUST 3, 2018, AMSTERDAM, THE NETHERLANDS GLOBAL STRATEGY DINNER),
(TRAPPED IN PURGATORY),
(INDU), (SPY), (NASDAQ), (IWM), (TLT)

MHFTR

Trapped in Purgatory

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I can't believe my eyes.

Here we are at the midpoint of 2018 and the main markets are virtually unchanged. The Dow Average is down 1.5%, the S&P 500 is up +1%, NASDAQ has gained 8.79%, and the Russell 2000 has tacked on 7.18%.

Despite all the promises that happy days are here again, here we are dead in the water. Since the passage of one of the most simulative tax bills in December, we have gone absolutely nowhere.

We are essentially stuck in stock market purgatory.

Of course, you can blame the trade wars, the onset of which marked the top of the bull market on January 24 at 26,252.

The president got one thing right. Trade wars are easy to win, but for dictatorships not for democracies.

If you complain about trade policies in China you are told to shut up or face getting sent to a re-education camp. Worst case you might disappear in the night as has happened to a number of Chinese billionaires lately.

In America any restraint of trade anywhere invites 10,000 highly paid lobbyists desperate to reverse the action. Offer any resistance and the reprobates are thrown out of office, as may happen here in four months.

The Chinese have one weapon against which we have no defense. They can go hungry. They'll just tell their people to toughen up for the greater good of the nation. When I first arrived in the Middle Kingdom 45 years ago they were still recovering from the aftereffects of a famine that killed 50 million (there are NO substitutes for food). Try doing that in the U.S.

The Chinese have another secret weapon at their disposal. They paid $3.63 a week for a subscription to the New York Times (including Sundays). Because of this they know that the president is going into the midterm elections with the lowest approval ratings in history.

And they are doing this running on a policy of sending children to concentration camps, which they don't even do in China anymore. This will cost the party votes in every state except in Oklahoma.

So the Chinese are content to hang tough, meet every tit with a tat, match every escalation, and wait out the current administration. The only question for them is whether the president will be gone in 2 1/2 years or in six months, so it pays to stall.

This is a country where history is measured in millennia. When I asked premier Zhou Enlai in the 1970s what the outcome of the 1792 French Revolution was, he responded "It's too early to say."

None of this is good for stock prices.

So I will continue with my now five-month-old prediction that markets will remain trapped in narrow ranges until before the midterms, and then rally strongly. It will do this not because of who wins, but because of the mere fact that it is over.

If you are a trader, unless you can buy stocks on those horrific capitulation panic days and sell on the most euphoric peaks, it's better just to stay away. I can do that, but I bet most of you can't. But then I've been practicing for 50 years. This is why I dumped the last of my positions yesterday morning at the highs of the day, shooting out three Trade Alerts in rapid succession.

By the way, these are excellent reasons to avoid the bond market as well. While the fundamentals tell us that interest rates should continue to rise for years, the charts tell us a different story.

With 10-year U.S. Treasury bond yields (TLT) hitting a five-month low today, it is hinting that a recession isn't a 2019 event, it in fact has already started. Bulls better fall down on their knees and pray to their chosen idol that this is nothing more than an extended short covering rally.

It all sounds like a great time to take a long cruise to me.

 

 

 

 

 

 

China in 1973

MHFTR

Italy's Big Wake-Up Call

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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

MHFTR

May 21, 2018

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Global Market Comments
May 21, 2018
Fiat Lux

Featured Trade:
(JOIN ME ON THE QUEEN MARY 2 FOR THE MAD HEDGE JULY 11, 2018 SEMINAR AT SEA),
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or NO TRADE),
($INDU), (SPY), (TLT), ($TNX), (CPB)

MHFTR

Market Outlook for the Week Ahead, or No Trade

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That was the most boring week of 2018.

Not only did we get no net movement; the range was an infinitesimal 200 Dow points. It was hardly enough to make a dog's breakfast.

Of course, the big news was the yield on the 10-year U.S. Treasury bond (TLT), which rose to 3.12%, a seven-year high. You might have expected this to prompt a complete stock market rout. It didn't. Maybe that is next week's business.

It is rare that the bullish and bearish arguments reach a perfect balance, but that is what we got. In the meantime, trading volume is shrinking, never a good sign. Will the last one to leave please shut out the lights?

Which is all an indication of what I have been warning you about for months. This is setting up to be a dreadful summer. If you've already made your year, with a 19.88% gain like I have, you're better off taking a long cruise than trying to outsmart the algorithms.

I managed to squeeze off only one trade so far this month. I sold short the S&P 500 (SPY) right at the high of the week. However, when the downside momentum failed, and a Volatility Index (VIX) spike failed to confirm, I bailed for a small profit. Pickings are indeed thin.

Whenever my trading slows down, I get the inevitable customer complaints. My answer is always the same. Reach for the marginal trade and you will get your fingers bit off. Don't be in such a hurry to lose money. As my wise Latin professor used to say, "Festina lente," or "make haste slowly."

My May return is +0.53%, my year-to-date return stands at a robust 19.83%, my trailing one-year return has risen to 56.25%, and my eight-year profit sits at a 296.30% apex.

And remember, the market is making this move in the face of rising oil prices and interest rates, always bull market killers.

To mix a few metaphors, when the sun, moon, and stars line up once again I'll go pedal to the metal with the Trade Alerts once again.

If you held a gun to my head and ordered me to tell you how the markets will play out for the rest of the year, try this.

We remain is this narrowing trading range for months, ending with a final decisive break of the 200-day moving average to the downside, now at 23,909. But we find a new low only 1,000 points, or 4% below that.

Then we launch into the post midterm election year-end rally, which could take stocks up 15% to 20% from the 23,000 low. This is why I have been saying that the best trades of 2018 are ahead of us.

So, renew that subscription!

To witness how cruel and stock specific the current market is, look no further than hapless Campbell Soup (CPB), the first ticker symbol I have had to look up this year. There is probably not a reader alive who was not nursed back to health by its iconic red canned chicken noodle soup.

A surprise earnings loss triggered a hellacious 14% one-day plunge. It is the first big victim of the new steel tariffs. Although it amounts to only a few pennies a can, that can be disastrous in this hyper-competitive world. It also turns out that Millennials prefer eating fresh food rather that the canned stuff.

Give thanks for small mercies. With three daughters I am at ultimate risk for a tab for three weddings. The nuptials for Meghan Markle and Prince Harry are thought to cost $45 million, most of it on security. Hopefully I will not someday become the father-in-law of a prince.

This coming week has a plethora of Fed speakers, some key housing numbers, and that's about it.

On Monday, May 21, at 8:30 AM, we get April Chicago Fed National Activity Index.

On Tuesday, May 22, nothing of note is announced.

On Wednesday, May 23, at 10:00 AM, the April New Home Sales.

Thursday, May 24, leads with the Weekly Jobless Claims at 8:30 AM EST, which saw a rise of 11,000 last week from a 43-year low. At 10:00 AM, we get April Existing Home Sales.

On Friday, May 25, at 8:30 AM EST, we get April Durable Goods Orders.
We wrap up with the Baker Hughes Rig Count at 1:00 PM EST.

As for me, I will be spending the weekend putting the finishing touches on my 2018 Mad Hedge European Tour.

Thanks to rising U.S. interest rates and a strong dollar, the price of a continental trip has dropped about 10% since the beginning of the year. Got to love that Swiss franc at 1:1 parity with the greenback. Maybe I can afford an extra cheese fondue.

Good Luck and Good Trading.

 

 

 

 

 

 

Yes, It All Looks Like Magic

MHFTR

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)

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