Diary Entry for Tuesday, April 1, 2014
Dear Diary,
4:30 PM Monday-the day before- Thought I?d check my Bloomberg to see how the Asian markets were opening. Wow! Japan finally had an up day. It must be fiscal year end window dressing. The VAT tax hike that takes effect tomorrow, from 5% to 8%, certainly has sucked the life out of that market. Nothing like strangling a recovery in the crib.
5:00 PM- Call from one of the top New York hedge funds. They just received a research report predicting that Google was going to $2,000. Should they chase it up here? I said not in your wildest dreams. Google has lead the charge in this market to the upside since September, and will lead the retreat going into the summer. Wait for a bigger dip. Call me old-fashioned, but I?ll buy a PE multiple of 9 versus 30 any day of the week.
Quite honestly, I don?t want to buy any stocks at these lofty altitudes. Shares are looking tired and are in desperate need of a rest. The bull market isn?t over, but needs to catch its breath. It still has to digest last year?s meteoric 30% gain, including dividends.
If you look at how San Francisco and Santa Clara real estate prices are going through the roof, with ferocious bidding wars, it is just a matter of time before technology takes over market leadership once again. I said he owed me a nice dinner at Masa at Time Warner Center on Columbus Circle, and we?ll meet up at my June 17 New York strategy luncheon.
Then he told me the real reason for his call. He knew I grew up near Hollywood, had dated several movie stars, and even appeared in one movie as an extra (Francis Ford Coppola?s Apocalypse Now). Perhaps, I had some insights? His firm had put up the money to make film, American Hustle. Is it worth seeing?
I said absolutely, but only if you want to gain insights in 1970?s fashion and music. I cringed when I remembered that some of those clothes are still hanging in the darkest reaches of my closet. Anyone need a pair of size 36 bellbottoms?
6:30 PM- Take kids to see the new animated film, Frozen. Notice how the kid movies are better than the adult movies these days? There are ample double entendres and innuendos to keep the grownups laughing all the way. Looks like Disney (DIS) has finally learned how to make movies again. Steve Jobs? widow has to be happy. She is the largest shareholder in the company, inheriting stock Steve got from selling them Pixar in 2006.
9:00 PM- Call from a friend at the People?s Bank of China in Beijing. He wants to know if they missed the top of the Treasury bond market (TLT) last summer, and if they should start unloading their $1 trillion worth of holdings. They have been on a buyer?s strike for the past two years, and have already pared back their position by $100 billion from the peak.
I said take the gift. The 30-year bear market in bonds has already started and this is a rare chance to unload paper close to the highs. Inflation will rear its ugly head once again in the 2020?s, when yields for the ten-year Treasury bond will hit high single digits. That would be a good time to flush out his bigger positions.
Then he asked, did I, by any chance, recommend the film, 12 Years a Slave, which won the Best Picture Oscar this year? It was a huge hit in Beijing, with lines extending for hours. I answered no, only if you want to see people beaten and raped for two hours. Not my idea of a good time. The film, while historically accurate, is a real downer. I was checking my watch towards the end.
However, it will confirm your worst opinions about Americans, which I know you haven?t changed since the Cultural Revolution. Race is still a hot button issue in the US. That?s what the new voting restrictions were all about. This is why this film could only be made by a British firm. (They banned slavery 55 years before we did).
9:30 PM- Hit the rack and try to catch some shuteye before the next call.
2:00 AM- One of my former staff members at Morgan Stanley calls me from a Private Bank in Geneva to tell me that the Euro is getting the stuffing knocked out of it. Is it time to buy?
I told him that I would rather find broken glass in my oatmeal this morning. We are miles (kilometers) away from a resolution of Europe?s woes. At the very least, they need a new treaty to create a ministry of finance to be run by the Germans. Expect that to take at least five years, if ever. Then, you can think about buying.
In the meantime, I wouldn?t touch the European currency with a ten-foot pole. European Central Bank president, Mario Draghi, is delusional if he thinks he can levitate the Euro with just talk. That makes the Euro (FXE) a much better short here than a long.
Then he moved on to the real purpose of his call. He was planning to take his wife out this weekend. Should they go to see The Wolf of Wall Street? Hell no, I said. You don?t want your wife to find out what you really do for a living, do you? Besides, the film drops the ?F? bomb a record 529 times. Definitely not for home consumption.
But certainly go see it alone. I was working on Wall Street when Jordan Belfort and a dozen other firms like them were fleecing customers on a massive scale. We at Morgan Stanley were amazed that they got away with it for so long.
As a foreigner, he will not notice all the Italian working class accents. These poor guys couldn?t have gotten real jobs on Wall Street if their lives depended on it. For some reason, I never got invited to all those broker parties with drugs and hookers. I only heard about it second hand. Am I really that square?
I slammed the phone back on the hook and went back to sleep.
6:00 AM- My website administrator called me in a panic. The store is down. A hacker attack prompted PayPal to suspend my account. Since I am one of their largest customers, I call my account rep and get it reopened. The Chinese should know better than to hack my site. One call to Beijing and I could have them shot. Go hack the National Security Agency instead. I hear it?s a lot easier.
7:00 AM- Another call from my website administrator. The website is down. My story on ?Why Gold is Dead? (click the link for the article http://madhedgefundradio.com/why-gold-is-dead/ ) brought a traffic spike that is causing the servers to melt. The gold bugs are going crazy over it. I am burning up the internet.
8:00 AM- I get a call from a leading money manager in London?s Mayfair district. Europe is closing. With gold down $100 in a week, is it time to buy?
Not yet, I said. The panic selling has only just started, and margin clerks everywhere were sharpening their knives. Wait for a capitulation to deliver a false breakdown below $1,200 before jumping in. That?s where I expect emerging market central bank participation to kick in.
And go have a pint of bitter for me at the Pig & Whistle next door, will you. Tell the owner, Nigel, to put it on my running tab. He owes me from the last Manchester United win.
He then raved about the terrorism movie, Captain Phillips. What did I think?
I usually don?t like movies where you already know the ending. But it was much better than I expected. Tom Hanks delivers a first class acting job. I said I thought the movie gave the most accurate portrayal of the actual day-to-day operations of Navy Seals on a mission. It certainly has created a new bull market for Somali actors.
10:00 AM- Better get to work on today?s letter. I?m already behind the eight ball. I?ve gotta lead with the Tesla (TSLA) story after that great 60 minutes piece last night. Boy, a lot of people sure look at me when I drive that car. Too bad they are mostly guys. But I can?t understand why my passengers keep getting carsick. I better take another look at Ford (F) too. I heard George Soros has taken a 3% stake in the company. Time to double up? The stock could be breaking out here in the wake of the General Motors (GM) crash.
1:15 PM- My friend, JR, a senior executive at an oil major, calls from Houston. What the hell was going on with the price of oil (USO)? Three months ago, it was at $91, then he blinked, and it was $105.
Crude certainly got a boost from the Crimea crisis, but that is now fading. The West lost the last Crimean War (in 1856), so why jump into another one? At the end of the day, nobody cares.
I told him that Israeli intelligence thinks there won?t be a war with Iran until the summer at the earliest, if ever. Until then, Texas tea was going to stay in a rough balance, with rising Chinese demand offset by growing American production, thanks to the new fracking technology. It?s not rocketing to $150, nor is it plunging to $30. That is why oil volatility has collapsed.
The range in oil for the past eight months has been tighter than a gnat?s ass, only $15. If you really must have an energy play on, go sell short some natural gas (UNG). A fading winter will run into burgeoning new supply from fracking, almost certainly causing a price collapse.
You might also buy some solar, like First Solar (FSLR). Three more years of Obama followed by eight with President Hillary means government support for alternative energy stretches as far as the eye can see.
He said thanks, and next time I was in town he would buy me a 24-ounce chicken fried steak at Billy Bob?s that spilled over both sides of the plate (2,500 calories). I can?t wait. I?ll let my doctor have the heart attack.
He then told me why he really called. He knew I was a former combat pilot and was acquainted with all those space people at NASA. His buddies down on the ranch had just seen Gravity, streaming it on Netflix (NFLX). Should he bother?
I loved the film, and thought it was incredibly realistic. Somebody had really done their research. It?s a real engineer?s film, so he would like it. Plus, it?s amazing to see how far digital film technology has gotten. These astronauts are the most trained people in the history of civilization, and I certainly sympathize with a pilot trying to manage a crash. I?ve totaled three planes myself. I was careful not to tell him how it ended.
2:00 PM- Still haven?t started on the letter yet. I have been answering 200 email requests for information about the Trade Alert Service. This always happens whenever I have a hot performance on. The watchers want to become players. With my three year return approaching high of 130%, new subscribers are pouring in.
4:45 PM- Well, I got the letter done, but I?m too late. The web editor has gone to the DMV to register her new Prius, and the backup has gone to the yoga studio. Ouch! 10% sales tax for new cars in Washington State! They must be as broke as California.
5:00 PM- I put on a 60-pound pack and my heavy climbing boots and head out the back door on a ten-mile snowshoe from the shores of Lake Tahoe to the High Sierra ridgeline. It?s snowing heavy, so I donned an extra wool sweater and filled my canteens with boiling water so it wouldn?t freeze. Gotta stay boot camp ready. You never know when Uncle Sam is going to call again. Who cares if I?m 62?
9:00 PM- Back to my screens. Had to put my feet in the tub because my toes froze again. The Euro has broken $1.37 again. Where was I last week? Asleep? Still, I am going to avoid the Euro. It has recently been so trendless that it has killed more traders than a bad tin of caviar. There are better things to do.
10:00 PM- Time to call it a night and break out a bottle of Duckhorn merlot. Jeese, it seems people only wanted to talk about movies today. Are they really trying to tell me something about the market?
Does anybody want my job?
