Diary Entry for Monday, August 29, 2016
Dear Diary,
4:30 PM Sunday-the day before - Thought I?d check my Bloomberg to see how the Asian markets were opening. Yikes!? They?re hammering the yen again. About damn time.
It looks like it is going to be a ?RISK ON? day. Better fasten my seat belt, put on my hard hat, and get ready for a busy day. No rest for the wicked. At least for the first 15 minutes of the trading day.
5:00 PM - Call from one of the top New York hedge funds. What?s going on with the market? Prices for bonds and the major stock indexes look like they have been glued to the screen for the past two months.?
Worse, he is losing money.
I told him that the memo is out. Stocks are going to new all time highs, as I have been predicting all year. Every one is afraid to sell for fear of not being able to get back in.
Look what happened after the Brexit surprise in June. Those who dumped stocks back then are still trying to get back in. Every dip have been a ?BUY? for seven years now, and that won?t change for years to come. This is why 77% of active managers are underperforming their benchmarks this year.
By the way, had he read my new book, ?Stock to Buy for the Coming Roaring Twenties?? It outlines why many of the major sectors are moving TODAY.
I said he owed me a nice dinner at Masa at Time Warner Center on Columbus Circle because he?s made so much money off me this year.?
I don?t care if it costs $500 a person. High end Japanese sake is cheaper than the best Bordeaux, because Chinese billionaires have bid up the prices so much. Just get an algorithm to make a reservation, as it is now almost impossible for a human to get one.
?Then he told me the real reason for his call. He knew I grew up near Hollywood, had dated several movie stars, and even appeared in a movie as an extra (Francis Ford Coppola?s Apocalypse Now).? What did I think of The Revenant, which his firm had put up the money to make? Is the film worth seeing?
I said only for the guys. I saw the film on the day it came out to gain insights on what my ancestors went through.
Even on a good day, 1823 was disgusting, as it starts out with mountain men butchering animals. Then 20 men are massacred by Indians in the first five minutes. It goes downhill from there.
The black and white hues of the Rocky Mountains in winter are stunning. It is a must see for film junkies. And Leonardo finally learned how to act.
9:00 PM - Call from a friend at the People?s Bank of China in Beijing.
Who is going to win your presidential election? If Donald Trump wins, its sounds like he will go to war with China immediately. Should we be worried?
I told him to put those concerns out of his mind. Hillary Clinton will win by a landslide. She is already ahead by double digits in several battle ground states. Many traditional red states, like Utah, Arizona, and Nevada, are turning purple.
More importantly, the London bookies are giving her ten to one odds. The markets have sensed this, and are refusing to sell off.
Markets love a pro-globalization candidate, as this has been buttering their bread for the past 70 years. China does too, which has seen the Shanghai Index ($SSEC) take off like a rocket since May. Mexico (EWW) too.
Then he asked, did I, by any chance, recommend the film, The Bridge of Spies, with Tom Hanks? Everyone in the Politbureau was seeing it.
?Absolutely,? I answered. I loved it. It was a very personal film for me as I spent a few years in West Berlin during the 1960?s. They absolutely nailed the atmosphere of the divided city during the period.
The movie covers the negotiations over the return of Francis Gary Powers, the American U-2 pilot shot down over Russia in 1960.
When I was on a NASA job testing Russia?s front line fighter jets in 1999, I was taken to a nearby museum on my day off. There was the wreckage of the unlucky U-2, which the Russians considered a national treasure.
I spotted a black nameplate with ?Lockheed? etched upon it and I asked if I could take it home as a souvenir.
?No, No, No, No,? I was waved off.
As depicted in the film, I was arrested by the Volkspolizei attempting to smuggle German newspapers into the East and held in jail overnight. It was a very grim time.
There is also a nice family oriented back story, so it is safe to take the wife.
Berlin Just Isn?t the Same Anymore
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 (FXE) is rallying. Is it time to sell?
After all the hawkish Fed talk on Friday, the US will certainly become the first developed country to raise interest rates in a decade.
As interest rate differentials are far and away the biggest drivers of the foreign exchange markets, that means the dollar will remain strong and the Euro weak for the foreseeable future.
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 Big Short with Steve Carell, based on the book written by my friend, Michael Lewis.
I said only if she didn?t speak English. The film accurately depicts traders and hedge fund managers using f*** every other word in the conversations.
Beyond that, I liked it. It accurately depicts how extreme the leverage in the financial crisis was before the crash.
The early players on the short side took endless abuse from their investors, a problem I know well. Of course, the big Wall Street banks tried to squeeze them out of their positions with fake margin calls. And yes, strippers really did own five houses, all mortgaged to the hilt.
I really like how the flic showed the best hedge fund mangers not trusting any published research. They had to fly down to Florida to find out for themselves that prime credits, supposedly secured by owner occupied homes, were really sublet to biker gangs.
I slammed the phone back on the hook and went back to sleep.
?
6:00 AM - My website administrator called me in a panic. My online store is down. A hack at
tack prompted PayPal to suspend my account. Since I am one of their largest customers, I call my account rep and get it reopened.
The North Koreans should know better than to try to take down my site. One call to Beijing and I could have them all shot. Go hack Sony instead. I hear it?s a lot easier.
7:00 AM - Another call from my website administrator. The website is down. My new service, the ?Mad Options Trader,? brought a traffic spike that is causing the servers to melt. I am burning up the Internet.
Is it something I said?
10:00 AM - I get a call from a leading money manager in London?s Mayfair district. Europe is closing. With gold down $55 this month, is it time to buy?
I said ?Not yet.? Look at the long term charts, and it is clear that the barbarous metal is attempting to put in a short term bottom.
World gold production fell for the first time in Q4, 2015 and will continue for the next four years by as much as 20%. After falling for five years, the commodity is ?sold out.?
Russia is buying more to dodge the sanctions imposed by the US government. So is the Chinese central bank, which is attempting to diversify away from dollar assets.
The next big bull market for the yellow metal won?t begin until the 2020?s, when inflation returns for real. Then it should run to $3,000-$5,000. Not until then will gold bugs be able to afford new suits.
In the meantime, the Fed will continue to torture gold bulls until their September 20-21 Federal Open Market Committee (FOMC) meeting where they will do absolutely nothing. Then it is off to the races again.
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 my last Manchester United win.
He then raved about last summer?s Armageddon film, Mad Max: Fury Road, a sequel to the old Mel Gibson franchise. Did I see it?
I did, and have been regretting it ever since. It is two hours of non-stop pointless violence. I almost walked out.
I hate to think that this is the direction in which Hollywood is moving. But foreigners love these things. Explosions are easier to understand than the English language.
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)? Only two years ago, it was at $107, then he blinked, and it was $26.
I said don?t worry. Oil is coming back, driven by Chinese demand. It isn?t going to zero, or even the $20 handle. But we may never see $100 again either.
Investors are avoiding the sector like the plague until they find out who will be driven into bankruptcy by the sudden price collapse, and who will be left standing.
The junk bond market (HYG) is suggesting that more than half of all energy issuers are going to default.
Eventually, the strong end up swallowing the weak (think Exxon (XOM)). However, major institutions have already started picking up shares in the companies with the best balance sheets, buying quality at a once in a generation discount.
Activists, like Carl Icahn, and the value players, such as Warren Buffet, are already involved.
In the meantime, buy some solar plays, like First Solar (FSLR). Sales are soaring, and costs are collapsing, setting up a ten bagger for the whole industry.
A five-year extension of the 30% alternative investment tax credit means government support stretches for 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 science buff. His buddies down on the ranch had just seen The Martian and liked it. Should he bother?
I loved the film, and thought it was incredibly realistic. Somebody had done some serious research. It?s a truly inspirational film, even for those with no interest in space exploration. It also takes one through the problem solving process that every scientist employs.
My 12-year-old daughter was so motivated that she is building a serious rocket for this year?s 6th grade science fair.
Only last weekend, I almost blew myself up test firing one of her rocket engines, which uses powdered sugar and Potassium nitrate for fuel. It is amazing what kind of high explosive ingredients you can buy on Amazon these days.
Oh, and the film is really funny.
2:00 PM - Still haven?t started on the letter yet. I have been answering dozens of email requests for information about the Trade Alert Service. This always happens whenever I have a hot performance streak on. The watchers want to become players. With my 69 month return approaching 205%, 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 his new Prius, and the backup has gone to the yoga studio.
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 hike up Berkeley?s Grizzly Peak. Gotta stay boot camp ready!
You never know when Uncle Sam is going to come calling again. Who cares if I?m 64? I can still hit a quarter on a tree at 50 yards with my Winchester Model 98 30-30.
I listen to an audio book on my iPhone 6, the seven volume Truman, by David McCullough about our 33rd president.
It is an amazing story.
Considered by most to be an average man at best, he dropped the atomic bombs on Japan, negotiated with Stalin at Potsdam, created the CIA and the Defense Department, desegregated the Army, ordered the Berlin airlift, went forward with the Hydrogen bomb project, stared down a megalomaniac Senator McCarthy (Donald Trump?) and fought the Korean war to a draw.
By the time I hit the trail, a layer of thick fog already blankets the city below me.
9:00 PM - Back to my screens. The Euro has broken $1.10 again. Where was I last week? Asleep? Still, I am going to avoid the Euro for now. It has had such a sharp move down over the past two year, that the risk of a sudden, rip your face off,short covering rally is ever present.
I'd rather keep some dry powder and buy it a few cents lower. At this point, The World is short the Euro. Maybe they read my letter?
10:00 PM - Time to call it a night and break out a bottle of Duckhorn merlot. Jeese Louise, it seems people only wanted to talk about movies today. Has the market really become that hard to trade?
The phone rings. Does anybody want my job?
