Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in London on Monday, July 8, 2013. A three-course lunch will be followed by a PowerPoint presentation and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing 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 $249.
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 club on St. James Street, the details of which will be emailed to you with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2012/03/Big_Ben_8583a-e1429708732816.jpg388400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-06 09:22:352013-06-06 09:22:35July 8 London Strategy Luncheon
After yesterday?s 217 point swoon, the S&P 500 (SPX) has fallen 4.3% from its late May peak. It looks like the ?Sell in May? crowd is having the last laugh after all, of which I was one.
Is this a modest 5% correction in a continuing bull market? Or is it the beginning of a Harry Dent style crash to (SPX) 300 (click here for the interview on Hedge Fund Radio)? Let?s go to the videotape.
This was one of the most overbought stock markets in my career. I have to think back to the top of the dotcom boom in 2000 and the pinnacle of the Tokyo bubble in 1989 to recall similar levels of ebullience. In fact, two weeks ago we were at a real risk of a major melt up if we didn?t encounter some sort of pullback. So the modest selling we have seen so far has been welcome, even by the bulls.
There is still a reasonable chance the final decline will be nothing more than a pit stop on the way to new highs. Institutional weightings in equities are at a lowly 31%, compared to 50% 20 years ago. It seems that everyone in the world is overweight bonds (see yesterday?s piece on ?Welcome to the Sack of Rome?).
In recent weeks, the S&P 500 yield ratio has fallen behind that of the 10 year Treasury bond, at 2.10%, but only just. With a price/earnings multiple of 16, we are bang in the middle of a long time historic range of 10-22. Zero overnight interest rates argue that we should be at the top end of that range. The argument that the ?Buy the Dip? crowd is still lurking under the market is real, just a little further than the recent dips allowed.
So how much lower do we have to go? After the close, I enjoyed an in depth discussion with my old friend, Jim Parker, of Mad Day Trader fame about the possible permutations. The following is an itinerary of what your summer trading might look like, expressed in (SPX) terms:
6.2% - 1,605 was the Wednesday low, the 50 day moving average, and the downside of the most recent upward sloping channel on the chart below. This trifecta of support is many traders? first stop for a bounce.
5.4% - 1,590 is the first major downside Fibonacci level. We could see this as soon as the May nonfarm report payroll is announced on Friday.
6.0% - 1,580 is the old 13-year high. Markets always love to retrace to old breakout levels.
6.5% - 1,570 represents a give back of one third of the November-May 330 point rally.
8.3% - 1,540 is the double bottom off the April low.
11.1% - 1,493 is the 200-day moving average. This is the worst-case scenario. I doubt we?ll get there, unless the fundamentals change, which they always do.
Jim gave me a couple more cogent insights. The average big swing move is 100-110 points. The last 100-point move sprung off of the March nonfarm payroll report, which came out on April 5. Big swings also often start and finish around an options expiration, the next one of those is coming on June 21. So for the short term, 1580-1590 is looking good.
To confuse you even further, contemplate the concept that I refer to as the ?Lead Contract.? There is always a lead contract around, one on which all traders maintain a laser like focus, which leads every other financial product out there. It says ?Jump,? and we ask ?How High?? It is also always changing.
Right now, the Nikkei average (DXJ) is the lead contract. The Japanese yen ETF (FXY) is the close inverse. Every flight from risk during the past two weeks has been preceded by a falling Nikkei and a rising yen.
If you want to get a preview of each day?s US trading, stay up the night before and watch the action in Tokyo, as I often do.
You might even learn a word or two of Japanese, which will come in handy when ordering in the better New York sushi shops.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/06/Girl-with-Chopsticks.jpg403269Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-06 09:20:352013-06-06 09:20:35Where?s This Market Bottom?
I feel obliged to reveal one corner of this beleaguered market that might actually make sense.
By 2050 the population of California will soar from 37 million to 50 million, and that of the US from 300 million to 400 million, according to data released by the US Census Bureau and the CIA fact Book (check out the population pyramid below).
That means enormous demand for the low end of the housing market?apartments in multi-family dwellings. Many of our new citizens will be cash short immigrants. They will be joined by generational demand for limited rental housing by 65 million Gen Xer?s and 85 million Millennials enduring a lower standard of living than their parents and grandparents.
These people aren?t going to be living in cardboard boxes under freeway overpasses. The trend towards apartments also fits neatly with the downsizing needs of 80 million retiring Baby Boomers. So you have three different generations converging on a single sector of the real estate market. Prices here will hold up, and may even rise.
Rents are now rising at more than 5% a year in some of the more popular markets, and vacancies are dropping like a stone. Good luck finding an apartment in Silicon Valley. Fannie and Freddie financing is still abundantly available at the lowest interest rates on record.
Institutions combing the landscape for low volatility cash flows and limited risk are now accounting for up to 30% of the low-end market. In some markets it is now cheaper to buy than to rent, a 50-year reversal, if you can get the credit.
Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-06 09:13:282013-06-06 09:13:28The One Safe Place in Real Estate
Featured Trade: (JULY 2 NEW YORK STRATEGY LUNCHEON), (WELCOME TO THE SACK OF ROME), (TLT), (TBT), (LQD), (MUB), (VNQ), (KMP), (BREAKFAST WITH FED GOVERNOR BOB McTEER)
iShares Barclays 20+ Year Treas Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
iShares iBoxx $ Invest Grade Corp Bond (LQD)
iShares S&P National AMT-Free Muni Bd (MUB)
Vanguard REIT Index ETF (VNQ)
Kinder Morgan Energy Partners, L.P. (KMP)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Seminar, which I will be conducting in New York, NY on Tuesday, July 2, 2013. An excellent three-course lunch will be provided. A PowerPoint presentation 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 throwing 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 $209.
The formal luncheon will run from 12:00 to 2:00 PM. 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 event will be held at a prestigious private club on Central Park South, the details of which will be emailed to you with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2012/03/empire.jpg376250Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-05 09:07:072013-06-05 09:07:07July 2 New York Strategy Luncheon
Let?s face it, the carnage in the bond markets in May outdid the sack of Rome.
Not only did the Treasury bonds (TLT) get hit. The entire high yield space was slaughtered, including corporates (LQD), junk bonds (JNK), REITS (VNQ), master limited partnerships (KMP), municipal bonds (MUB), and high dividend equities. Anything that looked and smelled like a bond got dumped.
As American bonds get their clocks cleaned, so did virtually the entire fixed income space worldwide. Yields on ten-year Japanese government bonds nearly tripled from 0.37% to 0.95%. German bond yields skyrocketed, from 1.20% to 1.55%. Suddenly, a global capital shortage broke out all over like a bad rash.
So has the Great Reallocation out of bonds into stocks begun? Has the Great Bond Crash of 2013 only started? Or is there something more complex going on here?
Don?t worry, the bond market is not about to crash. All we are seeing is a move to a new trading range for the ten year, from 1.50%-2-10% to 1.90%-2.50%. This has been my forecast for the Treasury bond markets all year. High yielding instruments, like those in junk bonds and REITS, will see more dramatic price declines. There are several reasons why this is the case.
For a start, the economy is just too weak to support any further back up in rates. Much of corporate American has grown so used to free money that even a modest rise in rates would be cataclysmic. It was also drop the residential real estate recovery dead in its tracks. Watch the US government?s budget deficit soar, once again, if interest rates continue their assent.
A 2% GDP growth will never be a springboard for 4%, 5%, or 6% yields. In fact, the risk is that we slow down from here, forcing the Fed to come to the rescue with more accommodative swaths of quantitative easing.
Look at the inflation, that great destroyer of bonds. The last reported unadjusted YOY CPI by the Bureau of Labor Statistics came in at a gob smackingly low 1.1% in April (click here for the website).? Real deflation is anything but a major threat, and will not provide the rocket fuel for further bond selling. When you here of friends getting surprise 20% pay hikes, then you can expect a return in inflation. That has been happening in China for several years now. But so far, I have not heard the good news at home.
Check out who has been buying bonds for the last five years? More than half of the Treasury auctions have gone to foreign governments. First it was China, and more recently to European central banks. These people don?t sell. They just redirect new cash flows. You can count on them keeping the bonds they already have until maturity, even if it is 30 years out. They will never be the source of large scale selling.
Examine who has the highest fixed income weightings in the US. It is the fabled ?1%.? When I serviced some of the wealthiest old money families on behalf of Morgan Stanley during the 1980?s, I was struck by one thing. These were the most conservative people in the world. Protection of principal was their primary consideration. Interest income was almost an afterthought.
This is because the majority of wealthy investors inherited their money, and lived in constant fear they would lose what they have. This is because, as trust fund kids, they had no idea how to earn their own money and create new wealth. Once capital disappeared, it was gone for good. Get a job? Heaven forbid! This investor class also has no desire to get hit with the long-term capital gains such sales would generate. So don?t expect selling from them either.
So, at worst case, you might see another 20-25 basis point rise in Treasury yields to the top end of the new range. At that point, they will be a buy for a rally that might correspond to a stock market selloff and flight to safety bid for bonds which I expect this summer. This takes the ten-year back to a 1.90% yield.
This will be particularly crucial for those who have been trading leveraged short fixed income instruments like the (TBT). They saw a dramatic 12-point, 20% rally in May from bottom to top. Any further gains from here will be of the high risk, low return variety. Maybe, it?s time to sit down and smell the roses? Or take a long summer vacation, as I plan to.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/06/Statue1.jpg448337Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-05 09:04:282013-06-05 09:04:28Welcome to the Sack of Rome
Featured Trade: (AUGUST 9 ZERMATT STRATEGY SEMINAR), (BREAKFAST WITH PIMCO?S MOHAMED EL-ERIAN), (TAKE A RIDE IN THE NEW SHORT JUNK ETF), (JNK), (SJB), (CORN), (TBT)
SPDR Barclays High Yield Bond (JNK)
ProShares Short High Yield (SJB)
Teucrium Corn (CORN)
ProShares UltraShort 20+ Year Treasury (TBT)
Come join me for the Mad Hedge Fund Trader?s Global Strategy Seminar, which I will be conducting high in the Alps in Zermatt, Switzerland at 2:00 PM on Friday, August 9, 2012. A PowerPoint presentation will be followed by an open discussion on the crucial issues facing investors today. Coffee, tea, and schnapps will be made available, along with light snacks.
You are welcome to attend in your mountain climbing gear, but you will have to leave your boots at the door. Last year, someone came down from the Matterhorn summit straight to the seminar, sunburned and tired, but happy.
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 throwing 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 $189, down from last year, thanks to the dramatic and welcome, as well as predicted, depreciation of the Swiss franc against the US dollar.
I?ll be arriving 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 event will be held at a central Zermatt hotel with a great Matterhorn view, operated by one of the village?s oldest families and long time friends of mine. The details will be emailed directly to you with your confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2012/03/matterhorn-Copy2-1.jpg300400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-04 01:05:052013-06-04 01:05:05August 9 Zermatt Global Strategy Seminar
Featured Trade: (HARRY S. DENT, JR. ON HEDGE FUND RADIO), (SPY), (IWM), (UUP), (GLD), (SLV), (USO), (XLE), (TLT) (A RELIGIOUS EXPERIENCE)
SPDR S&P 500 (SPY)
iShares Russell 2000 Index (IWM)
PowerShares DB US Dollar Index Bullish (UUP)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
United States Oil (USO)
Energy Select Sector SPDR (XLE)
iShares Barclays 20+ Year Treas Bond (TLT)
Your stock portfolio will get decimated by a stock market crash that could take the Dow average down 60% to 6,000 or lower. There will be no place to hide, as gold, silver, oil, real estate will see declines of similar magnitude.
Given the fresh dose of uncertainty besieging the markets these days, I thought I'd touch base with my pal, co-conspiring Eagle Scout, and fellow traveler, Harry S. Dent, Jr. I was inviting a bomb thrower to tea.
I listen to Harry, not because he is an iconoclast, one of the few original thinkers out there, and sometimes, a complete wild man, although these are all admirable qualities to be found in a global strategist. I listen to him because in the past, he has been as right as rain.
So when an opportunity arose to bag him for Hedge Fund Radio, I jumped. It would give my listeners an opportunity to sort through the tealeaves, work through alternative scenarios for the future of disparate asset classes, and test competing investment theories. What I got was nothing less than a Vulcan mind meld.
Harry argues passionately that we are witnessing the end of the third great bubble in debt, hot on the heels of earlier forays into madness in technology stocks and real estate. Add public and private debt from all sources, and it totals $130 trillion, the greatest accumulation of IOU?s in history. The Federal Reserve is now manipulating all markets, and the exercise is certain to end in tears. The only way out from this will be to suffer an economic and financial crisis worse than we have seen to date.
A key part of Harry?s work revolves around generational spending patterns. Americans see spending peak when they reach the ages of 46-50, and bleed off from there. He blends this perspective in with historical data on demographics and some traditional Eliot Wave Analysis to produce one of the most refined long-term views in the marketplace.
Harry runs an independent research boutique, which has accurately predicted many of the major moves in financial markets during the past 25 years.
His unique blend of demographic research, identification of global consumer spending patterns, and long-term cycle analysis, really makes Harry one of a kind. Foreign governments, major hedge funds, financial advisors, and individuals are all just wild about Harry. They have found his advice indispensible when navigating the sticky shoals of international finance.
Growth of the national debt (TLT) continues to be a major headache. Since the Great Depression, public spending has grown steadily, from supporting small town 'Mayberry' to the equivalent of a New York City. While much of the early deficit explosion resulted from WWII and Vietnam, all of the recent growth has come from entitlements, like Medicare and Social Security. Government estimates of $46 trillion in unfunded liabilities are wildly inaccurate, with $70 trillion closer to reality.
Harry's advice to investors is to use any strength in coming months to unload stocks (SPY) (IWM). He would sell all remaining holdings in gold (GLD) and silver (SLV). He also wants to dump oil (USO) and other energy plays (XLE). And he believes we are about to enter a prolonged period of dollar strength. His favorite vehicle for the greenback is the ETF (UUP), which offers investors a long position against a basket of foreign currencies.
Harry is a native of South Carolina, who like Federal Reserve governor Ben Bernanke, went off to Harvard where he got his MBA. His career then took him to the top-notch private equity firm, Bain & Co., where he reported to recent presidential candidate, Mitt Romney.
After years of consulting with Fortune 100 companies, he found gaping holes in their understanding of the global economy. That spurred him to take off and create his own research boutique to address these grievous shortfalls in understanding.
In addition to Harry?s many talents, he is also a prolific writer. His most recent tome is The Great Crash Ahead (click here to purchase from Amazon). You can guess the topic. He has also published The Great Boom Ahead (1993) (click here to purchase from amazon),? The Roaring 2000?s (1999) (click here to purchase from Amazon),? and The Great Depression Ahead (2008) (click here to purchase from Amazon). Note that the timing on all of these volumes is prescient.
Purchasing a download of the entire interview for $4.95 is very simple. Just go to the HEDGE FUND RADIO menu tab and click on the pull down menu for RADIO SHOW (click here for the link at http://madhedgefundradio.com/radio-show/). Click on the green BUY NOW button and complete the order form. A blue link will appear telling you to ?click here to proceed?. Then click on the small blue box with the question mark inside to download. Hit the PLAY arrow to listen. You can pause, fast forward, or rewind at any time.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/06/Harry-S.-Dent-Jr..jpg267202Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-06-03 10:27:192013-06-03 10:27:19Harry S. Dent, Jr. on Hedge Fund Radio
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