Global Market Comments
December 23, 2013
Fiat Lux
Featured Trade:
(THE ONE BRIGHT SPOT IN REAL ESTATE),
(A SHORT HISTORY OF HEDGE FUNDS),
(THE POPULATION BOMB ECHOES), (POT), (MOS), (AGU),
(THANK GOODNESS I DON?T LIVE IN SWEDEN), (EWD)
Potash Corp. of Saskatchewan, Inc. (POT)
The Mosaic Company (MOS)
Agrium Inc. (AGU)
iShares MSCI Sweden (EWD)
Global Market Comments
December 20, 2013
Fiat Lux
SPECIAL END OF YEAR ISSUE
Featured Trades:
(GO LONG CHRISTMAS CHEER AND HOT BUTTERED RUM),
(A SPECIAL NOTE ON EXERCISED OPTIONS)
Global Market Comments
December 19, 2013
Fiat Lux
Featured Trade:
(MAD HEDGE FUND TRADER PROFIT HITS 63%),
(SPY), (TLT), (FXY), (SFTBY), (AAPL), (XLF),
(I WAS WRONG?.BUT IT DIDN?T MATTER)
(A DIFFERENT VIEW OF THE US)
(THE STRUCTURAL BEAR CASE FOR TREASURY BONDS),
(TLT), (TBT)
SPDR S&P 500 (SPY)
iShares 20+ Year Treasury Bond (TLT)
CurrencyShares Japanese Yen Trust (FXY)
SoftBank Corp. (SFTBY)
Apple Inc. (AAPL)
Financial Select Sector SPDR (XLF)
ProShares UltraShort 20+ Year Treasury (TBT)
The performance of the Mad Hedge Fund Trader?s Trade Alert Service is still going ballistic, reaching the heady height of 63.08% for the year.
Including both open and closed trades, 24 out of the last 26 consecutive Trade Alerts have been profitable. The results so far in December are up a stunning +7.04.
The three-year return is an eye popping 118%, compared to a far more modest increase for the Dow Average during the same period of only 32%.
That brings my averaged annualized return up to 39.3%.
This has been the profit since my groundbreaking trade mentoring service was launched three years ago. It all is a matter of the harder I work, the luckier I get.
I held on to every risk on position during the two-week December correction, fully expecting the pause to become the springboard for a new run to all time highs by year-end. That is exactly what happened in the wake of the Federal Reserve?s decision to taper its quantitative easing program by only $10 billion a month, mere sofa change given the size of our bond market.
That sent off to the races my long positions in the Financials Select Sector SPDR (XLV), the S&P 500 (SPY), and Internet giant Softbank (SFTBY). I cashed in one of my three short positions in the Japanese yen (FXY), which broke to new multiyear lows. I kept my shorts in the Treasury bond market (TLT), which crashed. I?ll double up here on the next rally.
It looks like I still have room to take in a few more percentage points in profits before 2014. Japan should explode to the upside tonight, where I am maintaining a hefty 40% weighting in my model trading portfolio. My followers will spend New Years laughing all the way to the bank.
This is how the pros do it, and you can too, if you wish.
Carving out the 2013 trades alone, 77 out of 92 have made money, a success rate of 83%. It is a track record that most big hedge funds would kill for.
My esteemed colleague, Mad Day Trader Jim Parker, has also been coining it. Since April, his own performance numbers have just come back from the auditors, revealing that he is up a staggering 279%.
The coming winter promises to deliver a harvest of new trading opportunities. The big driver will be a global synchronized recovery that promises to drive markets into the stratosphere in 2014. The Trade Alerts should be coming hot and heavy. Please join me on the gravy train. You will never get a better chance than this to make money for your personal account.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service and my daily newsletter, the Diary of a Mad Hedge Fund Trader. You also get a real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. Upgrade to?Mad Hedge Fund Trader PRO?and you will also receive Jim Parker?s?Mad Day Trader?service.
To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
Ben Bernanke finally did the deed. He tapered his quantitative easing program, from $85 to $75 billion a month. I thought he would wait until next month for incoming Fed governor Janet Yellen to take the helm, and the responsibility. It was not to be.
The good news for followers of my Trade Alert Service was that it didn?t matter. $85 or $75 billion is really six of one and half dozen of another, almost. As we used to say on the trading desk at Morgan Stanley, just take the difference out of my next paycheck. It is a win-win, which I had expected.
The one certainty today was that the Fed would make a decision. Now that it?s out of the way, stocks can only go up.
Market?s reacted as if there had been no taper at all. Stocks and the dollar rocketed, led by financials, technology, health care, and industrials. Softbank gapped up and is approaching a new high for the year. Bonds, gold, volatility, and the yen collapsed. My model trading portfolio is almost a perfect reflection of what you should be doing with your money.
Big Ben?s incredibly dovish talk we received during the press conference that followed was fantastic news for risk assets everywhere. It means that interest rates will remain lower for longer than most expected. ?Highly accommodative money monetary policy remains appropriate? is still ringing in my ears. This will remain the case until unemployment falls ?well below 6.5%? and inflation returns to 2%. ?The Fed balance sheet will continue to expand.?
What all this does is deliver a ?goldilocks? scenario for the foreseeable future. The potential disasters for January, a Fed taper and a Washington shut down have suddenly gone missing.
Ben?s Christmas present to us all is a printing press to print money in the markets for the next three months.
That?s Ben! That?s Just What I Wanted!Global Market Comments
December 18, 2013
Fiat Lux
Featured Trade:
(THE RECEPTION THAT THE STARS FELL UPON),
(NLR), (CCJ), (CORN), (WEAT), (SOYB), (DBA),
(OIL ISN?T WHAT IT USED TO BE), (USO),
(TAKING A BITE OUT OF STEALTH INFLATION), (SGG), (WEAT)
Market Vectors Uranium+Nuclear Enrgy ETF (NLR)
Cameco Corporation (CCJ)
Teucrium Corn (CORN)
Teucrium Wheat (WEAT)
Teucrium Soybean (SOYB)
PowerShares DB Agriculture (DBA)
United States Oil (USO)
iPath DJ-UBS Sugar TR Sub-Idx ETN (SGG)
Virtually every analyst has been puzzled by the seeming immunity of stock markets to high oil prices this year. In fact, stocks and crude have been tracking almost one to one on the upside. The charts below a friend at JP Morgan sent me go a long way towards explaining this apparent dichotomy.
The first shows the number of barrels of oil needed to generate a unit of GDP, which has been steady declining for 30 years. The second reveals the percentage of hourly earnings required to buy a gallon of gasoline in the US, which has been mostly flat for three decades, although it has recently started to spike upwards.
The bottom line is that conservation, the roll out of more fuel efficient vehicles and hybrids, and the growth of alternatives, are all having their desired effect. Developed countries are getting six times more GDP growth per unit of oil than in the past, while emerging economies are getting a fourfold improvement. The world is gradually weaning itself off of the oil economy. But the operative word here is 'gradually', and it will probably take another two decades before we can bid farewell to Texas tea, at least for transportation purposes.
But the Mileage is Great!Global Market Comments
December 17, 2013
Fiat Lux
Featured Trade:
(THE RISING DRUMBEAT FOR ALIBABA),
(SFTBY), (S), (TMUS), (T),
(RAMPANT WAGE INFLATION STRIKES CHINA), (FXI)
(CHECK OUT OBAMA?S LATEST STIMULUS PLAN),
(TESTIMONIAL)
SoftBank Corp. (SFTBY)
Sprint Corporation (S)
T-Mobile US, Inc. (TMUS)
AT&T, Inc. (T)
iShares China Large-Cap (FXI)
Rumors hit the market Friday that Sprint (S) will mount a $20 billion takeover bid for T-Mobile (TMUS) in early January. The news caused a late day kerfluffle on what would otherwise have been a slow December pre holiday Friday.
The Shares of both companies immediately jumped 10%, which left many analysts scratching their heads. Normally, the shares of the acquirer falls (they?re spending money), while those of the target rise (they are selling for a premium to the market).
Why do I care about a minor US phone company? Guess who owns Sprint? Softbank, which took over the company for $21.8 billion last July, and carries a hefty 20% weighting in my model-trading portfolio.
The move would make Softbank one of the three largest US carriers. That will automatically trigger an antitrust review by the Justice Department, which blocked a similar takeover attempt for giant AT&T (T) earlier. Look at how Eric Holder stood in the way of the American Airlines-US Air deal, which both firms clearly needed to survive. And this is in a country with 100 airlines. So any decision here could be a long wait.
I think this is just an opening shot in a long campaign that eventually leads up to the Alibaba IPO, expected to be one of the largest in history (the biggest was also from China, the $128 billion deal for the Industrial Bank of China in 2010). Expect to hear a lot about Softbank?s role in all of this in coming months. This should be good for its stock price.
As part of the build up, my old employer, the Financial Times of London, named Alibaba founder and CEO, Jack Ma, as its Person of the Year. The paper chronicles Ma?s rise for abject poverty in Hangzhou, China, where he was the son of impoverished traditional performers, to becoming one of the world?s richest men.
Ma was fascinated by the English language at an early age, and used to listen to my own broadcasts on BBC Radio to learn new words (another one of my former employers). After graduating in 1988, he earned $12 an hour as a teacher in China. While working for the Foreign Trade and International Cooperation, he escorted foreign visitors to the Great Wall. One of them turned out to be Jerry Yang, co founder of Yahoo.
Thus inspired, Ma went on to found Alibaba in 1999. Its initial strategy was to match up Chinese manufacturers with American customers, an approach that proved wildly successful. He then took on Ebay. In the following years the US e-commerce giant saw its Chinese market share plummet from 80% to 8%, most of that going to Alibaba. Today, Alibaba has 600 million registered users, and one day in November it clocked a staggering $6 billion in sales.
The FT estimates its current market value at $100 billion. To read the rest of the FT profile, please click here. Its IPO will be one of the preeminent investment events of 2014. Better to get in early.
Followers of my Trade Alert Service will notice that this is one of the few outright equity trades that I have done this year. This is a way for me to deleverage my exposure after a spectacular stock market run. Equity ownership ducks the time decay that plagues call options, and avoids the leverage inherent in call spreads.
If the stock is unchanged over the holidays, it won?t cost me a dime. One thing is for sure. When the Alibaba IPO is announced, it will be a surprise. The only way to participate is to get in indirectly through a minority owner now.
Don?t expect an allocation from your broker, unless they think it is going o fail.
I rely on hundreds of 'moles' around the world whose job it is to watch a single, but important indicator for the world economy. One of them checks for me the want ads in the manufacturing mega city of Shenzhen, China, and what he told me last week was alarming.
Wage demands by Chinese workers have been skyrocketing this year. The biggest increases have been at the low end of the spectrum, where migrant workers from the provinces are earning up to 40% more than a year ago. Wage settlements of 20% or more for trained workers are common. One factory that gave staff only a 10% increase saw many of them fail to return after the recent Chinese lunar New Year.
Of course China's blistering 8% GDP growth is the cause, which has pushed inflation well beyond the government's 4% target. So the cost of living in the Middle Kingdom is rising dramatically. The problem has been particularly severe with imported commodities, such as in food. Hence, the increased demands.
This is important for the rest of us because low wages have been the cornerstone of the Chinese economic miracle. In just the last decade, average monthly Chinese wages have climbed from the bottom rung to the middle tier. That seriously erodes the country's cost advantage, which has gained it such enormous shares in foreign markets, like the US. Take away the country's price advantages, and demand will wither, slowing growth globally.
What will they be demanding next? Collective bargaining rights? In the meantime, keep checking those Craig's List entries for Shanghai.
Average Monthly Salary
$3,099 Yokohama, Japan
$1,220 Seoul, South Korea
$888 Taipei, Taiwan
$235 Shenzhen, China
$148 Jakarta, Indonesia
$100 Ho Chi Minh City, Vietnam
$47 Dhaka, Bangladesh
$1.25 an Hour? You Must Be Joking!