As of today, we will be sending out two types of Trader Alerts, medium term ones from the Mad Hedge Fund Trader, and short term ones from the new Mad Day Trader service. Please be careful not to confuse the two.
We have done what we can to distinguish the two, using different logos, colors, fonts, and subject. However, in the heat of battle I understand that it is all too easy to speed-read your data sources and jump to conclusions. As a back up, each service will post its model trading portfolio on the website after the close of each day.
These two services will evolve to better meet your needs, and we appreciate your input whenever possible.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/Special-Note.jpg251350Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-05-20 01:04:212013-05-20 01:04:21A Special Note to Trade Alert Followers
With smoke still rising from the ruins of the recent silver crash, I thought I?d touch base with a wizened and grizzled old veteran who still remembers the last time a bubble popped for the white metal. That would be Mike Robertson, who runs Robertson Wealth Management, one of the largest and most successful registered investment advisors in the country.
Mike is the last surviving silver broker to the Hunt Brothers, who in 1979-80 were major players in the run up in the ?poor man?s gold? from $11 to a staggering $50 an ounce in a very short time. At the peak, their aggregate position was thought to exceed 100 million ounces.
Nelson Bunker Hunt and William Herbert Hunt were the sons of the legendary HL Hunt, one of the original East Texas wildcatters, and heirs to one of the largest Texas fortunes of the day. Shortly after president Richard Nixon took the US off the gold standard in 1971, the two brothers became deeply concerned about financial viability of the United States government. To protect their assets they began accumulating silver through coins, bars, the silver refiner, Asarco, and even tea sets, and when it opened, silver contracts on the futures markets.
The brother?s interest in silver was well known for years, and prices gradually rose. But when inflation soared into double digits, a giant spotlight was thrown upon them, and the race was on. Mike was then a junior broker at the Houston office of Bache & Co., in which the Hunts held a minority stake, and handled a large part of their business. The turnover in silver contracts exploded. Mike confesses to waking up some mornings, turning on the radio to hear silver limit up, and then not bothering to go to work because he knew there would be no trades.
The price of silver ran up so high that it became a political problem. Several officials at the CFTC were rumored to be getting killed on their silver shorts. Eastman Kodak (EK), whose black and white film made them one of the largest silver consumers in the country, was thought to be borrowing silver from the Treasury to stay in business.
The Carter administration took a dim view of the Hunt Brothers? activities, especially considering their funding of the ultra-conservative John Birch Society. The Feds viewed it as an attempt to undermine the US government. The proverbial sushi hit the fan.
The CFTC raised margin rates to 100%. The Hunts were accused of market manipulation and ordered to unwind their position. They were subpoenaed by Congress to testify about their motives. After a decade of litigation, Bunker received a lifetime ban from the commodities markets, a $10 million fine, and was forced into a Chapter 11 bankruptcy.
Mike saw commissions worth $14 million in today?s money go unpaid. In the end he was only left with a Rolex watch, his broker?s license, and a silver Mercedes. He still ardently believes today that the Hunts got a raw deal, and that their only crime was to be right about the long term attractiveness of silver as an inflation hedge. Nelson made one of the great asset allocation calls of all time and was punished severely for it. There never was any intention to manipulate markets. As far as he knew, the Hunts never paid more than the $20 handle for silver, and that all of the buying that took it up to $50 was nothing more than retail froth.
Through the lens of 20/20 hindsight, Mike views the entire experience as a morality tale, a warning of what happens when you step on the toes of the wrong people.
And what does the old silver trader think of prices today? Mike saw the current collapse coming from a mile off. He thinks silver is showing all the signs of a broken market, and doesn?t want to touch it until it hits the $20?s. But the white metal?s inflation fighting qualities are still as true as ever, and it is only a matter of time before prices once again take another run to the upside.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/Silver-Dollar.jpg174189Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-05-20 01:03:472013-05-20 01:03:47Revisiting the First Silver Bubble
Featured Trade: (HANGING OUT WITH CONGRESSMAN BARNEY FRANK), (THE MOST FUNCTIONAL WORD IN THE ENGLISH LANGUAGE), (AN EVENING WITH NOBEL PRIZE WINNER MICHAEL SPENCE) (EEM),(EWZ), (EWY), (EWT), (EWS), (EWH),(TF), (IDX), (EWM), (FXI), (EWJ)
iShares MSCI Emerging Markets Index (EEM)
iShares MSCI Brazil Capped Index (EWZ)
iShares MSCI South Korea Capped Index (EWY)
iShares MSCI Taiwan Index (EWT)
iShares MSCI Singapore Index (EWS)
iShares MSCI Hong Kong Index (EWH)
Thai Capital Fund Inc. (TF)
Market Vectors Indonesia Index ETF (IDX)
iShares MSCI Malaysia Index (EWM)
iShares FTSE China 25 Index Fund (FXI)
iShares MSCI Japan Index (EWJ)
One of the highlights of last week?s SkyBridge Alternatives Conference was the blowout party on Wednesday night (click here for the blow by blow description).
Seeking refuge from a band that was blasting my ears out, and fleeing the nubile young bodies that kept bumping up against me and spilling my margaritas, I sought out a safe haven. There, cloistered in the quietest, darkest refuge from the event, far beyond the most distant swimming pool and palm tree, I found former congressman, Barney Frank, sitting in a lounge chair.
If this name piques your memory, it is because Barney was a co-sponsor of the 2011 Dodd-Frank bill, the most sweeping regulation of the financial industry since the Securities Act of 1933. As chairman of the House Financial Services Committee, he became a familiar figure during the endless hearings for the controversial legislation.
To say that Barney is a man with strong opinions is probably the understatement of the century. If you make a statement he believes is factually incorrect, he will shout you down until he has the last word. I watched him do exactly that when he sat on a discussion panel with republican strategist, Carl Rove. The two went at it like cats and dogs for ten minutes, the rest of the participants sitting there in awe, with their mouths hanging open.
Barney is upset that the US is still spending massively to defend Europe 20 years after the collapse of the Soviet Union, their only real enemy. They can easily afford to pick up the tab themselves. The US has vastly overextended itself with military commitments. We can no longer afford to be the world?s policeman.
Sunni and Shia Muslims have been hating each other for a thousand years. We are not going to change that in a few years of spending a few trillion dollars and thousands of lives. You can?t use the US military for social engineering. Attempting to do so just pisses everyone off and only creates more American enemies.
Banks are now bigger than they were before the financial crisis, largely because the government required them to post more capital. But ?too big to fail? has been solved. The new Resolution Authority has the power to wipe out shareholders in the wake of future poor business decisions. That did not exist in 2008. No more bonuses will be paid for large losses.
Corporate tax reform is a big priority, but is far more difficult than people realize. The people you take money away from get much angrier than the beneficiaries of change are made happy. That is a problem in the current big money election environment.
Son of a New Jersey truck stop operator, Barney went on to obtain a degree from the Harvard Law School. He entered politics in 1972 when he joined the Massachusetts House of Representatives. Frank was elected to congress in 1980, representing the western Boston suburbs. He went on to win reelection 12 consecutive times.
Frank first went to Washington about the same time as I joined the White House Press Corps as a correspondent for The Economist magazine. I didn?t know him personally, but shared with him his frustration in trying to explain economic issues to then president Ronald Reagan. When I asked the president from home state of California why his tax cuts gave himself the largest percentage reduction, he answered that ?It?s because I pay the most taxes.? Go figure.
What I found most fascinating about Barney was his recollections of the Boston political scene during the 1960?s. In the past year, I have read biographies on John Kennedy, Robert Kennedy, Ted Kennedy, and the most interesting, their father, Joe Kennedy. If you ever want to gain insight into one of history?s best natural traders, finest businessmen, and the first chairman of the SEC, read The Founding Father by Richard Whalen. Barney knew all of these men, and listening to his first hand stories about them was a real education.
All of this great information came at the price of sitting downwind from his cigar smoke for two hours. As a journalist, I long ago learned that if you want to get the real dope, you sometimes have to pay the price.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/John-Thomas-and-Barney-Frank.jpg357577Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-05-17 09:42:262013-05-17 09:42:26An Evening With Congressman Barney Frank
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/Girl-I-dont-know.jpg189223Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-05-17 09:38:122013-05-17 09:38:12The Most Functional Word in the English Language
Featured Trade: (ONE THE TESLA MELT UP), (TSLA), (F), (FIATY), (PEUGY), (SCTY), (BBRY), (HLF), (NFLX), (FSLR)
Tesla Motors, Inc. (TSLA)
Ford Motor Co. (F)
Fiat S.p.A. (FIATY)
Peugeot S.A. (PEUGY)
SolarCity Corporation (SCTY)
Research In Motion Limited (BBRY)
Herbalife Ltd. (HLF)
Netflix, Inc. (NFLX)
First Solar, Inc. (FSLR)
This was the short squeeze that was begging to happen. Five guys owned 50% of the company, including the visionary founder, Elon Musk. Of the remaining float, 45% had been borrowed and sold short by hedge funds. All that was needed to ignite a rally was for someone to say ?Boo.?
That is exactly what Ben Bernanke has done with his non stop quantitative easing. A poorly researched hatchet job by the New York Times on the new all electric Tesla Model S-1 produced a flood of countervailing positive reviews extolling the many virtues of the revolutionary vehicle (click here for ?My Take on the Tesla Tiff?). The Times could not have delivered a more effective marketing campaign if you paid them millions.
Then the company announced its first profit in history. It sold 4,900 cars, versus an expected 4,500, one of which was to me. Some 70% were of the highest margin, 80 kWh, $80,000, 300-mile range version. This was on the heels of its first ever price increase. The Q1, 2013 net jumped to $11.9 million compared to an $89.9 million loss in the earlier quarter. It boosted its forecast of this year?s total production from 20,000 to 21,000 vehicles.
There is now a one-year waiting list for the least expensive $60,000 model. Cash is pouring in so fast that Tesla announced it would pay back its $465 million Department of Energy loan five years early. It is also talking to Google about adopting its driverless technology.
South African native, Elon Musk, is said to be the model on which the Iron Man character, Tony Stark, is based. His IPO late last year for SolarCity (SCTY) has also delivered a gangbusters performance, up 216%. Next on the calendar is taking Space X public, his heavy lift rocket company with a NASA contract potentially worth $1 billion. Since January, his personal fortune has tripled to $7 billion. This is truly the man with the golden touch.
The onslaught of good news triggered one of the sharpest and most furious short squeezes in stock market history. (TSLA) is now one of the top performing shares in the world this year, up a staggering 194%. Elon did get some outside help. Squeezing the largest short open interest stocks has been one of the most profitable trading strategies of 2013. Tesla is simply following on the heels of Blackberry (BBRY), Herbalife (HLF), and Netflix (NFLX), with similar results.
There is a cautionary tale in the Tesla action. Many of the players on the short side were global warming deniers who believed the whole thing was a leftist hoax. They thought Tesla, and all the other ?green? plays, like First Solar (FSLR), were the artificial creations of government subsidy that were all going to zero once the free money was withdrawn.
After I toured the Tesla factory and saw that he car was real, I warned some of these guys they were out of their mind. Whenever one filters investment decisions through a political prism, whatever that prism is, you might as well pile up your money and set fire to it.
At $97 a share, with a market capitalization of $12 billion, Tesla is now one of the world?s largest car companies, beating out Fiat (FIATY), which owns Chrysler and Peugeot (PEUGY). This is for a company that has only made 10,000 cars! Tesla now boasts a price earnings multiple of 70X, compared to 9.6X for Ford Motors (F).
What Tesla should do here is file for a secondary share offering and use the cash raised to retire debt. They can also sue the state of Texas, which has banned sales of the cars. They are trying to force the company to sell through a local, good ol? boy dealer network. Tesla only sells its cars online, another ground breaking and cost cutting aspect of their business model. So much for deregulation in the Lone Star State. I guess they are trying to keep us hooked on Texas Tea.
Even at the January price of $33, Tesla was expensive when compared to its peers. The investors were clearly taking a longer-term view. The demand for $60,000-$110,000 cars is limited. Next year it broadens out to the Model X, and all electric SUV, which should cost about the same.
Most on Wall Street have completely missed the main point of the whole Tesla story. The real play here is for a low end mass market vehicle, which Tesla will bring out in 4-5 years, using the manufacturing expertise and technology they developed with the earlier Roadster and the S-1.
Keep in mind that electric car battery ranges are doubling about every three years. Look no further than my own garage, where I jumped from an 80 mile range Nissan Leaf to the Tesla S-1 in just two years. I just sold my starter electric car to an ecstatic PhD in biochemistry at UC Berkeley for a bargain $18,500.
That means that by 2018, you will be able to buy a 300-mile range, five passenger Tesla hatchback for about $40,000. This will enable the company to grow into a major worldwide industry presence. That?s when the ?Big Three? becomes the ?Big Four?. That?s what a $97 share price is screaming at you.
Let me explain what else is in the works. By next year, there will be 20,000 Tesla?s in the San Francisco Bay Area. Our local utility, PG&E (PGE), currently sells us power for electric cars for 5 cents a kWh between midnight and 7:00 AM. By sometime in 2014, if you leave your car plugged in, it will then buy it back from you during the day at 40 cents a kWh!
With the backup supply of 20,000 1,000-pound Tesla lithium ion batteries, (PGE) might be able to take a few natural gas power plants offline (the last coal fired plant in California was closed about 10 years ago). Not only will the power for your car be free, your utility will pay you to drive it! The system is already undergoing beta testing at a utility in Delaware. Welcome to the future!
Last weekend, I drove to the local shopping mall to run some errands. There was a classic car show on, so there was no spare parking. I asked the show organizers if they were accepting late entries, just to get a parking space.
Both the fans and the other exhibitors were drawn to my S-1 like a magnet, mobbing the car and barraging me with questions. Some thought it was a joke, as there was no visible motor. I felt like Marty McFly bringing a car from Back to the Future. I popped out to run my errands. When I returned, I had won first prize and a blue ribbon.
There is one battery problem that I should write about here. Since the end of the ski season, my Toyota Highlander Hybrid has sat neglected in my driveway, accumulating pine needles and bird poop. Since I?m not driving it enough to recharge the conventional lead acid battery, it keeps going dead. The Auto Club has already been out to give me a jump-start three times, and they say next time, they are going to bill me.
I have written at length about Tesla since the inception of this letter five years ago. To read another recent piece with more details on the engineering and the specs, please click here. Expect to hear a lot more.
The Competition
First Prize for a Late Entry
I Could Have Sworn I Left the Engine There Yesterday
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/JT-with-Tesla-e1427723768460.jpg227400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-05-16 01:03:212013-05-16 01:03:21On the Tesla Melt Up
Featured Trade: (JULY 19 FRANKFURT, GERMANY STRATEGY LUNCHEON), (TESTIMONIAL), (MY FAVORITE SECRET ECONOMIC INDICATOR), (RUNNING THE SAN FRANCISCO BAY TO BREAKERS)
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Frankfurt, Germany on Friday, July 19, 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, 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 $239.
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 prestigious private club not far from the Botanical Gardens, 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.
I suffer earthquakes, forest fires, floods, dubious neighbors, high taxes, corrupt politicians, and a bankrupt state government to live in California. It is all worth it just to run the Bay to Breakers every year, a five mile run from the San Francisco Bay to the Pacific Ocean, which has evolved into the world?s most bizarre sporting event.
The word from race organizers this year was that alcohol was banned, but that nudity was OK. Well, that?s California for you. Of the 15,000 participants, more than a few graciously accepted the tradeoff.
The race started off at the Embarcadero, near the Ferry Building, in unusually cold weather, and goose bumps were in abundance. Once underway, we all warmed up. I moved up early in the crowd, passing a dozen Elvis impersonators, some revolutionary War soldiers in jockey shorts, and a swarm of buzzing honeybees.
I made short work of the many wearing fat suits, body builders in tutus, and at least three dancing harems. Some of the guys were obviously very excited to be there. I thought I actually might get a placing when I was passed by at least ten speeding vaginas running faster than I could possibly catch them. I managed to finish in the top 1,000, just behind Adam and Eve, but well ahead of a group of drunken cavemen.
Then arose the problem of what to do with 15,000 naked people at the beach in 50 degree temperatures. A ?C? note scored a taxi back to my starting point (note to the accounting department: don?t even think about denying this expense!). It was amazing how well behaved the crowd was, given the lack of dress.
The funds raised went to a dozen local charities. I ended up with a free T-shirt and a string of pink party beads. Today, I?m sitting here too sore to get out of my chair, Heartbreak Hill having taken its toll. Still, I can?t wait to run in next year?s race, when I hope for a better time and a more provocative costume. Competing dressed as a Mad Hedge Fund Trader, I didn?t turn too many heads, given the competition.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/Medal-Bay-to-Breakers-SF.jpg334254Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-05-15 09:11:312013-05-15 09:11:31Running the San Francisco Bay to Breakers
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There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
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