Bring Back QE!
You wanted clarity in understanding the current state of play in the global financial markets? Here?s your #$%&*#!! clarity.
You should expect nothing less for this ridiculously expensive service of mine.
But maybe that is the cabin fever talking, now that I have been cooped up in my Tahoe lakefront estate for a week, engaging in deep research and grinding out the Trade Alerts, devoid of any human contact whatsoever.
Or, maybe it?s the high altitude.
I did have one visitor.
A black bear broke into my trash cans last light and spread garbage all over the back yard. He then left his calling card, a giant poop, in my parking space.
Judging by the size of the turds, I would say he was at least 600 pounds. This is why you never take out the trash at night in the High Sierras.
Ah, the delights of Mother Nature!
We certainly live in a confusing, topsy-turvy, tear your hair out world this year. Good news is bad news, bad news worse, and no news the worst of all.
The biggest under performing week of the year for stocks is then followed by the best. Net net, we are absolutely at a zero movement, and lots of clients complaining about poor returns on their investment.
I tallied the year-on-year performance of every major assets class and this is what I found.
+16% - Hedged Japanese Stocks (DXJ)
+15% - Hedged European stocks (HEDJ)
+13% - US dollar basket (UUP)
+10% - My house
0% - Stocks (SPY)
0% -? bonds (TLT)
-5% - Japanese Yen (FXY)
-11% - Euro (FXE)
-12% - Gold (GLD)
-18% -? Oil (USO)
-27% -? Commodities (CU)
-27% - Natural Gas (UNG)
There are some sobering conclusions to be drawn from these numbers.
There were very few opportunities to make money this year. If you were short energy, commodities, and foreign currencies, you did very well.
Followers of the Mad hedge Fund Trader can?t help but know and love these ticker symbols. They?ll notice that our long plays were found among the asset classes with the best performance, while our short bets populated the losers.
The problem with that is most financial advisors are not permitted to place client funds in the sort of inverse or leveraged ETF?s that most benefit from these kinds of moves (like the (YCS), (EUO), and (DUG)).
That left them reading about the success of others in the newspapers, even when they knew these trends were unfolding (through reading this letter).
How frustrating is that?
What was one of my best investments of 2015?
My San Francisco home, which has the additional benefit in that I get to live in it, have a place to stash all my junk, and claim big tax deductions (depreciated home office space, business use of phone, blah, blah, blah).
Of course, I do have the advantage of living in the middle of one of the greatest technology and IPO booms of all time. Every time one of these ?sharing? companies goes public, the value of my home rises by a few hundred grand.
The real problem here is that investing since the end of the Federal Reserve?s quantitative easing program ended a year ago has become a real uphill battle.
While the government was adding $3.9 trillion in funds to the economy we traders enjoyed one of the greatest free lunches of all time. It made us all look like freakin? geniuses!
Just maintaining their present $3.9 trillion balance sheet, not adding to it, has left almost every asset class dead in the water.
Heaven help us if they ever try to unwind some of that debt!
Janet has promised me that she isn?t going to engage in such monetary suicide.
The Fed is continuing with Ben Bernanke?s plan to run all of their Treasury bond holdings into expiration, even if it takes a decade to achieve this. And with deflation accelerating (see charts below), the need for such a desperate action is remote.
Still, one has to ponder the potential implications.
It all kind of makes my own 43% Trade Alert gain in 2015 look pretty good. But I don?t want to boast too much. That tends to invite bad luck and losses, which I would much rather avoid.
