?The economy without debt is like major league baseball without steroids,? said Jack Ablin, chief investment officer of BMO Private Bank.
Global Market Comments
April 14, 2016
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE APRIL 18 MIAMI GLOBAL STRATEGY LUNCHEON),
(ROTATING INTO HEALTH CARE AND BIOTECH),
(VRX), (ABBV), (BSX),
(IBB), (AMGN), (GILD), (CELG), (BIIB), (REGN),
(HOW TO AVOID PONZI SCHEMES),
(TESTIMONIAL)
Valeant Pharmaceuticals International, Inc. (VRX)
AbbVie Inc. (ABBV)
Boston Scientific Corporation (BSX)
iShares Nasdaq Biotechnology (IBB)
Amgen Inc. (AMGN)
Gilead Sciences Inc. (GILD)
Celgene Corporation (CELG)
Biogen Inc. (BIIB)
Regeneron Pharmaceuticals, Inc. (REGN)
Come join me for the Mad Hedge Fund Trader?s Global Strategy Luncheon, which I will be conducting in Miami, Florida on Monday, April 18, 2016.
A three-course lunch will be followed by an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate.
And to keep you in suspense, I?ll be tossing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $247.
I?ll be arriving at 11:30 AM and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a restaurant at a major downtown hotel.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets for the luncheons, please click here.
There has been no more despised sector in the stock market for the past eight months than health care and biotech.
Ever since presidential aspirant Hillary Clinton launched the Tweet that sank the troubled sector in August, both political parties have taken turns beating it up, like tag team wrestlers.
Clinton wants more competition in the industry and an end to price gouging, naming companies by name, like Valeant Pharmaceuticals (VRX) as guilty parties. Trump is demanding more competition from foreign imports.
Ted Cruz intends to demolish that great wellspring of health care profits, Obamacare, on his first day in office. Bernie Sander wants to nationalize the lot.
Traders and investors can be forgiven for not wanting to touch health care with a ten-foot pole. The stocks responded by cratering a heart rending 30%-80%.
However, a funny thing has happened over the last few weeks. Health care and biotech stocks have started going up.
And you know what? They are going to keep going up. In fact, I think that health care, along with banks, and energy will be your big alpha plays for 2016.
The sector has one big thing going for it: the calendar.
Each passing day brings the end of the current election closer, and the end of the present onslaught on the sector. Think of all the negativity as an option approaching accelerated time decay.
And here?s the crucial thing about health care. The earnings story never went away, only the share valuations did. Health care and biotech remain the healthiest segments of US industry with the greatest earnings prospects.
China, eat your heart out!
So fall down on your knees and thanks the politicians for a gift that will keep on giving. Their fulminating is enabling you to get into one of the best industries at the cheapest possible prices.
The shopping list is rich.
AbbVie (ABBV) was spun off from Abbot Labs in 2013. It has a relatively low cost cancer drug, Imbruvica, that dodges political risk. It also sells a blockbuster rheumatoid arthritis drug, Humira, and a hot thyroid drug. Earning per share will double in two years.
Boston Scientific (BSX) has a solid market share in medical devices, one of the safest corners of the health care field. No controversial $100,000 cures here. So does Thermofisher (TMO).
Gilead Sciences (GLD) is a name my Trade Alert followers already know and love, having made fortunes there in the last couple of years. They have the last word in a hepatitis cure, Solvaldi. For more depth on the compan,y please read my latest opus by clicking here for ?Keep Gilead Sciences on Your Radar?? (note: you have to be logged in to read it).
Celgene (CELG) has several blockbuster drugs in the pipeline treating psoriasis (Otezla), blood cancer (Revlimid), and cancer (Abraxane). A classic baby boomer retirement play, the company should double in value in five years.
Finally, if you want to take a safer basket play, look at the IShares NASDAQ Biotechnology Index ETF (IBB). Their top holdings include Amgen (AMGN), Gilead Sciences (GILD), Celgene (CELG), Biogen (BIIB), and Regeneron Pharmaceuticals (REGN).
To view its prospectus, please click here.
As for Valeant Pharmaceuticals (VRX), I wouldn?t touch IT with a ten-foot pole.
I spent a sad and depressing, but highly instructional evening with Dr. Stephen Greenspan, who lost most of his personal fortune with Bernie Madoff.
The University of Connecticut psychology professor had poured the bulk of his savings into Sandra Mansky?s Tremont feeder fund; receiving convincing trade confirms and rock solid custody statements from the Bank of New York.
This is a particularly bitter pill for Dr. Greenspan to take, because he is an internationally known authority on Ponzi schemes, and published a book entitled Annals of Gullibility-Why We Get Duped and How to Avoid It.
It is a veritable history of scams, starting with Eve?s subterfuge to get Adam to eat the apple, to the Trojan horse and the Pied Piper, up to more modern day cons in religion, politics, science, medicine, and yes, personal investments.
Madoff?s genius was that the returns he fabricated were small, averaging only 11% a year, making them more believable. In the 1920?s, the original Ponzi promised his Boston area Italian immigrant customers a 50% return every 45 days. My suspicious grandmother wisely passed on an invitation to join the plan.
Madoff also feigned exclusivity, often turning potential investors down, leading them to become even more desirous of joining his club. For a deeper look into Greenspan?s fascinating, but expensively learned observations and analysis, go to his website at www.stephen-greenspan.com.
My financial advisory clients, by and large, have expressed a desire to be kept in the loop once a quarter and when it matters in between, but don't want to hear from me on an ongoing constant basis. ?I know because I've asked.
They are mostly retired, conservative by nature, and want to enjoy life while trusting that I know what I'm doing. ?I often get my talking points from you, and it's interesting to watch the relief on their faces when I talk, for example, about the millennials being the hope behind the national debt.
I point out that we have something China and Japan don't have--a large group of young people coming up the pike. ?For them those talking points bring a great sig of relief.
I'm going into some detail because it's something to think about when you're marketing your service. ??
My thoughts off the top of my head.
Cheryl
Portland Oregon
"The level of fact available from news services is way less than it once was,? said Roger McNamee, co-founder of venture capital fund Elevation Partners.
Global Market Comments
April 13, 2016
Fiat Lux
Featured Trade:
(LAST CHANCE TO ATTEND THE APRIL 15 HOUSTON STRATEGY LUNCHEON)
(WHY IS THE JAPANESE YEN SO STRONG?)
(FXY), (YCS), (UUP),
(AN EVENING WITH BILL GATES, SNR.),
(TESTIMONIAL)
CurrencyShares Japanese Yen ETF (FXY)
ProShares UltraShort Yen (YCS)
PowerShares DB US Dollar Bullish ETF (UUP)
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Houston, Texas on Friday, April 15, 2016.
A three course lunch will be followed by a wide ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be tossing a few surprises out there too.
Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $238.
I?ll be arriving an hour early and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private downtown Houston club the location of which will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research.
To purchase tickets, please click here.
In short, nobody knows.
I have talked to about every currency guru out there and all seem as puzzled, perplexed, befuddled, and confused as I am.
Not only that, there hasn?t been any confirmation of the strong yen from other asset classes, which has rocketed from a low of ?125.85 last June to a high of ?107.60 this week.
Normally when the yen is strong, you expect stocks (SPY), (IWM), junk bonds (HYG), and emerging markets (EEM) to be in free fall. They aren?t. In fact all of these high beta asset classes are pushing up against one-year highs.
Either the virile yen is presaging a gut wrenching crash in stock prices, or it isn?t. Go figure.
However, I do have a few theories.
1) The strong yen is part of a generalized weak dollar move (UUP) triggered by the cancellation of the next seven Federal Reserve interest rate hikes brought on by the January stock crash. The Chinese stock crash poured gasoline of the flames.
Over the long term, interest rate differentials explain all foreign currency moves, and the greenback just gave up its advantage.
2) A lot of hedge funds ended 2015 with large short positions in the yen, making them ripe for a short squeeze.
In fact, the net trader?s position swung from a short of 30,300 futures contracts in December to long 50,000 contracts in January. This is a humongous swing of $9 billion in underlying.
Since then, there was been a continuing cycle of traders reestablishing shorts based on poor Japanese fundamentals, then getting stopped out, and repeating the cycle again and again, taking the yen ever higher, and the P&L?s of traders ever lower.
3) April is the beginning of the Japanese fiscal year, and the yen is always strong as Japanese repatriate foreign profits to invest in Japan and avoid local taxes.
4) Despite this massive move in the yen against the long-term economic interests of Japan, the Bank of Japan has not lifted a finger to stop it with more quantitative easing. Negative interest rates only made the yen stronger. As central bank meetings came and went with no effective action, new yen buying waves were triggered.
You really have to ask the question of ?How stupid can a government get before they do the right thing?? The answer, to the pain of many forex traders is ?A lot more stupid than you think.?
5) The truly amazing thing is that the strong yen continued in the face of a massive capital flight from Japan fleeing the country?s new negative interest rate policy.
According to Japan?s Ministry of Finance, some $3.2 billion left Japan for sunnier climes and higher interest rates in January, followed by $27 billion in February and a staggering $53 billion in March. This enormous outflow will continue for the rest of this year. Notice the hyperbolic increase.
6) Even more amazing is that the yen has continued to appreciate in the face of huge sales of Japanese stocks by foreign investors in Q1, some $63 billion. They are seeking to duck the hit Japanese corporate earnings will take from the strong yen. Some 10% of the total Japanese foreign earnings have vaporized in just three months.
All of this is proof that this is not your father?s trading markets. All asset classes are trading totally differently than they have in the past.
The last time I experienced conditions like this it was in Japan in the early 1990?s, right at the onset of a 20-year financial and economic crash.
Real individual and institutional end investors had totally abandoned the market. All that were left we an odd assortment of hedge funds, bank proprietary books, and spivs.
After the initial six month, 50% crash in the Nikkei Average, nobody made any money. Traders were just batting the same stock back and forth like in a ping-pong match, with little net overall movement.
In other words, it was a trader?s worst nightmare. No one earned even enough to cover their nighttime sushi and Suntory Whiskey bills. And this went on for two decades.
Today, I have a grand total of five subscribers in my former home of Japan. I have over 100 in Singapore catering to the enormous offshore Chinese business.
I don?t think this is happening right now in the US. Still, the similarity is unnerving.
So what happens next?
As we approach the second half of 2016, the prospects for a new round of Fed rate raises will return. When that happens, it is back to the penalty box for the yen as its dire fundamentals reassert themselves once more.
I expect it to quickly give up all of its gains for this year and maybe more. One can only hope.
That?s when you plow back into long positions in the (YCS) and short positions in the (FXY).
