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Interview With A Mad Hedge Fund Trader

Tyler Durden's picture




 

Republished courtesy of Phil's Stock World and Ilene

Mad Hedge is quite a fascinating character who’s had a very exciting career in finances and more. He writes daily newsletter entries on market action, stocks and trends in the economy, and I highly recommend taking a moment to peruse his site, Diary of a Mad Hedge Fund Trader

-Ilene

Introduction

Mad Hedge Fund Trader began his career in finance by moving to Japan and working at Dai Nana Securities as a research analyst in 1974. In 1976 he was named the Tokyo correspondent for The Economist magazine and the Financial Times, which then shared an office. He traveled the world interviewing famous people, such as Ronald Reagan and Margaret Thatcher. In 1982, he was named the US editor of Euromoney magazine, and in 1983 he built a new division in international equities for Morgan Stanley. After moving to London in 1985, Mad Hedge supervised sales and trading in Japanese equity derivatives. In 1989, he became a director of the Swiss Bank Corp, responsible for Japanese equity derivatives. A year later, he set up an international hedge fund which he sold in 1999.

I haven’t even covered all of Mad Hedge’s adventures, such as his latent movie star career (as an extra in the 1979 epic war film, Apocalypse Now), and who knows what else. But now, missing the adrenaline-surging excitement of active trading, Mad Hedge has returned to the hedge fund business, set up an educational website, and is busy keeping up with the demands of newsletter writing.. So let’s begin our interview with Mad Hedge by exploring his current thoughts on the markets. 

Interview

Ilene: Hi Mad Hedge. You’ve had a fascinating career having little to do with your major in biochemistry. A brief review of your newsletter shows that your recommendations early in 2009 have appreciated by an average of around 400%. You’ve been writing your daily market thoughts and investment strategies at your website - www.madhedgefundtrader.com - which it’s terrific, by the way. What are your goals with this site?

Mad Hedge: This whole thing started out as a letter to investors in my hedge fund, to tell them my thinking behind my positions. Then I thought, why not post this on the web and see what happens? Six months later it is now going out to 50,000 readers a day, mostly to portfolio managers, financial advisors, and traders. The growth has been explosive.

Ilene: Who are your readers?

I seemed to have stumbled on a market that I describe as “semi-professionals.” If you are a big hedge fund, with a staff of 600 and a huge in-house research department, I’m not going to tell you anything you don’t already know. But there appear to be a few million people out there who trade their own accounts, or invest their own IRA’s. They have never worked on Wall Street, but have taught themselves a lot about markets and investing. My letter gives them the 30,000 foot view on global stock, bond, currency, commodity, and real estate markets which they can’t find at their online broker. About half of them are from abroad. When I get up in the morning now, there are five e-mails waiting for me from China and India asking what to do about natural gas. I also try to make the letter funny and entertaining. Not all financial publications have to be dreary reading. It’s not always about the next stock to buy.

Ilene: In a recent letter you wrote that one of your favorite ETF’s is the Proshares Ultra Short Treasury Trust (TBT). Why is that?

Mad Hedge: TBT is a 200% leveraged bet that long Treasury bonds will go down. While the Fed keeps short rates low, it doesn’t directly control long rates. As the supply of government bonds increases exponentially, their eventual collapse is inevitable. All Ponzi schemes must come to an end, and the US government is no exception. We currently have the greatest liquidity driven market of all time, and the ten year is eking out a mere 3.30% yield, pricing in near zero inflationary expectations. The average yield on this paper for the last ten years is 6.20%. If the yield goes back to 5%, that will take the TBT from $45 to $70. The TBT could perform even better if Treasuries lose their triple “A” rating, which I think is a real possibility.

Historically, bonds are not a good buy in a low interest rate, deflationary environment. If long rates move from 3% back to the 12% we saw in the early eighties, bond holders will get slaughtered, and the TBT could exceed $200. Even if inflation stays low, the sheer weight of supply and credit concerns will crater government bond prices.

Ilene: What’s the worst case scenario for the bond market?

Mad Hedge: Debt service is currently 11% of the budget. If interest rates rise sharply, that could double to 22%. Then you get a downward spiral like you saw in Latin America in the eighties, when higher debt service creates more borrowing, and more borrowing creates a higher debt service, until the whole thing blows up. At some point China, Japan, the Middle Eastern countries may stop buying our debt. There are only so many “greater fools” out there.

The only way out of this is for the economy to return to a long term 3%-4% growth rate. That’s obviously what Obama is hoping for with his programs. He’s taking big risks, but he doesn’t have much choice. He really did inherit a bad hand.  If he did nothing, we’d be in a depression by now, with 25% unemployment. He understands what he’s doing and understands the risks. He has great economic advisors.

Obama couldn’t have allowed the banking system to collapse. We need banks as the economy’s lynchpin. A year ago we could have lost the entire financial system over a weekend. Ships were being turned around at sea and going back home because their letters of credit were failing. The freeze up in credit could have gone on for years.  

The stock market is up 50% since Obama took office, so it likes the uneasy stability that we have now. Credit markets have recovered tremendously, and IPOs are coming to the market again. Junk bond funds are up, confidence is returning. There’s greater willingness to lend, though only at high interest rates. But it’s a big improvement over last year.

Ilene: What do you expect for mortgage rates in the next few months? Years?

Mad Hedge: You shouldn’t touch real estate, as I think it will be dead money for another decade. Rent, don’t buy. If you have to buy, then get a 30 year fixed rate mortgage now at 5%, because rates are going up a lot in the future. When I bought my first home in New York in the early eighties, I got nailed with a 17% interest rate on my mortgage. We may revisit those levels.

Houses will continue to move lower, maybe another 10% or so. We have another wave of foreclosures hitting the system soon, triggered by the option arm readjustments. I see support for prices when the cost of owning and the cost of renting are more in line. Home ownership may have to become cheaper than renting, because of perceived risk to the principle, for the real estate market sell-off to finish.  However, expecting houses to drop a lot from here is like shorting Citibank at $3. We’ve basically had the big move already. Due to poor demographic factors, the demand for houses is going to take a long time to come back. While 80 million baby boomers are trying to sell their houses to 65 million gen Xer’s, don’t expect a recovery in prices, especially when the gen Xer’s are still living in your basement.

Ilene: You mentioned you missed the rally in financials, but still have concerns about the financial sector.

Mad Hedge: With financials, I knew they would rebound, but didn’t imagine the extensive move we’ve seen. It was the greatest dead cat bounce and short covering rally of all time. But the financial sector will have troubles for years. If I had to buy U.S. stocks, I’d buy big tech stocks like Microsoft (MSFT), Oracle (ORCL), Intel, (INTC) and Cisco (CSCO), because for the most part they have tons of cash and little debt. Tech stocks didn’t have the problems that were plaguing the other sectors. For example, they have no troubled assets, and no regulatory clamp down on their business. The credit crisis didn’t affect them directly because they finance their operations through cash flow and tend not to borrow. Of course, they’re hurt indirectly when the customers have credit problems.

Credit markets are now seeing a huge differentiation in terms. Lenders are much more discriminating about who they lend to. American consumers are very constrained, but foreign consumers are not as constrained. They are not returning to frugality as we are because they didn’t share our excesses in the first place. You don’t see many black Cadillac Escalades with chrome wheels in China. If I had to buy stocks, I would buy equity in foreign companies where the growth will be in the coming years. In March, you could have bought anything and had a great trade, as the rising tide lifted all boats. But stocks in emerging markets outperformed US stocks by over a two to one margin.

Ilene: Would you be buying stocks now?

Mad Hedge: No, I sold most of my positions in June. The risk was low in March, but not so low in June, and it’s even greater now. The PE multiple on the S&P 500 has just jumped from 10 to 20 in six months. Historically, a 20 multiple is a terrible time to enter the market. Markets are discounting a “V”-shaped recovery, which we are not going to get. I think we’ll get more of a “square root” shaped recovery, a “V” followed by sideways to a gradually upward sloping grind. We’ve already had the “V”. Markets are overpriced. I don’t see how we can have huge economic growth with capital-constrained banks, catatonic consumers, and commercial real estate troubles up the wazoo. One of the only positives is the weak dollar, which makes everything we sell to the rest of the world cheaper. This is good for our multi-national companies, good for our exporters. So far, the dollar is on a grinding, controlled move down, which is good. But if the dollar’s fall accelerates, it would not be good. A real dollar panic would lead to the widespread dumping of dollar assets, and commodity prices would explode. Then we’ll get to $2,000 for gold and $40 for silver very quickly.

Ilene: You spent several years wildcatting for natural gas in Texas and Colorado, which has given you a unique insight into the energy space. What are your current thoughts on natural gas and oil?

Mad Hedge: Stay away from natural gas. The volatility will kill you. If you are a masochist, then buy it only when it’s cheap, on big dips, in the $3/MBTU range. In the last three years, thanks to the new “fracting” technology used in oil shales, we have discovered a 100 year supply of natural gas sitting under the US, and the producers have not been able to cut back fast enough. So now we have a supply glut, and we are almost out of storage. This is what took us down from $13 to $2.40 in 18 months. The lack of hurricanes has not helped demand either. Producers have been cutting back like crazy, trying to balance supply and demand, with a breakeven point of $2.   They need a cold winter to help bring things back into balance. If the industry gets organized, then gas can become the 20 year bridge we need, until energy alternatives kick in. That makes me a big supporter of the “Pickens Plan.”

Oil is much more interesting. It overshot to downside in January to $32. Crude is now at $70 climbing out of the recession. Imagine how high it will get when all economies are functioning again. The financial crisis hurt the ability of big oil companies to get financing for large development projects in oil. These projects can take five to ten years to bring online. That means we will get higher oil prices sooner. We may get a pull back to the $50s, but the $30’s would be a stretch. The $32 low was an artificial one caused by a complete absence of liquidity in all markets. I don’t think we’ll see those lows again.

Ilene: Where do you see the price of oil going in the distant future?

Mad Hedge: I think it may dip into the 50s, then up, perhaps skyrocketing to $300 before dropping back down to $3 after alternatives take over and demand vanishes. But that’s at best 20 years out. If we can wean ourselves off oil in 20 years, it would be a huge accomplishment.

Ilene: I noticed you speak a little about politics in your essays; do you have a leaning one way or another?

Mad Hedge: I’m politically neutral. I’m getting bashed by the right these days because I’ve said that the Republicans have no ability to affect the legislative process now. But we need to adjust our portfolios to reflect the current political realities. No matter how much you love Obama, you can’t dispute the fact that the massive issuance of government bonds he is proposing is terrible for the bond market and the dollar, but great for precious metals and commodities. Obama won by a big margin, so the Democrats will be around for a while. Of course, if my “square root” scenario doesn’t pan out, and we get a serious “W” recession instead, all bets are off. People will only give him the benefit of the doubt for so long.

Ilene: Where do you think the stock market’s going to go over the next few years?

Mad Hedge: I think there’s a 1 in 3 chance for new lows. That’s the “W” scenario. But with Lehman, Bear Stearns, Merrill Lynch, and Washington Mutual gone, we have run out of companies that can suddenly go under and trigger a new financial crisis. The big survivors are partially government owned, and of course zero interest rates help a lot. More banks are going under, but they will be smaller, regional banks with excessive exposure to commercial real estate.

Ilene: How does this affect your actions in the markets?

Mad Hedge: The best and least risky trades were in the early part of the year. Now, there’s a lot more risk in all markets. I’m neutral right now. If stocks dropped from here, I might be a buyer, but only in energy, commodities, and technology, and of course in emerging markets like Brazil, India, China, Korea, and Vietnam. Gold, silver and commodities have all had huge runs. My inner wimp has me in cash, waiting for better opportunities. I haven’t been playing the short side, because it’s a nightmare trying to short a liquidity driven market with interest rates at zero. There is no return on low risk investments now. Capital always moves to risky assets when interest rates are zero. Just look at Japan in the 1980s. There PE multiples soared from 10 to 100 purely driven by liquidity. For the last three years of that run the fundamental analysts were left twisting slowly in the wind. Artificially low interest rates boost asset prices to artificially high prices. It always ends in tears, but can play out for a while. You want to have an asymmetric risk reward metric in your favor, as we did in March of this year. Now, we don’t have that.

The next downward move in the markets will more likely be due to disappointing economic data, earning misses, etc., not due to a total collapse of the system. We may sell off, but I don’t think it will be to new lows. It’s hard to see new lows with interest rates at zero. Instead, I see the “square root” recovery scenario mentioned earlier. The market may start drifting lower as people start seeing this possibility. That might set up a trading range for the S&P 500 which could last for years, something like 800-1,200. During the nineties, Japan peaked at ¥39,000, then traded in a ¥20,000-¥25,000 range for five years, before the final collapse to ¥7,000. That’s one scenario for the US.

Ilene: You’ve had an amazing career. Let me ask you about some of the people you’ve interviewed. What was Ronald Reagan like?

Mad Hedge: Although I never agreed with him politically, you couldn’t help but like the guy. He always had a joke ready. He was a lot smarter than he let on.

Ilene: And Margaret Thatcher, the prime minister of Britain?

Mad Hedge: Her nickname as “The Iron Lady” was well deserved. She could stare holes right through you. She treated journalists like a disapproving school teacher, which of course, she was.

Ilene: How about the terrorist leader, Yassir Arafat, of the PLO?

Mad Hedge: His body guards almost shot me when I reached to turn over a cassette in my tape recorder. I always thought he was a terrible leader. That is why the Palestinians never got anywhere, and why the Israelis left him alone.

Ilene: Meeting China’s Deng Xiaoping must have been amazing.

Mad Hedge: I am 6’4” and he was only 4’9”, so of course there were plenty of opportunities for humor. I could never envision this guy going on the Long March. He had a tremendous wit. Someone asked him why China kept its borders closed, and wasn’t this an imposition on human rights. He said if he opened the borders, the surrounding countries would get flooded with people. He asked “How many Chinese do you want? 20 million? 30 million?” I also met Zhou Enlai during the Cultural Revolution. He was a brilliant man, the last man on a bell shaped curve of 500 million.

Ilene: I read somewhere that you interviewed four US Secretaries of the Treasury.

Yes, Miller Reagan, Schultz, and Brady. And I visited the French chateau of a fifth, C. Douglas Dillon. I keep a collection of dollar bills they signed.

My goal in life was always to get in the way of history, and let it run me over. It’s been an amazing life. I wouldn’t trade it for anything.

Ilene: What about Apocalypse Now?

Mad Hedge: I happened to be in town to interview Ferdinand Marcos, the president of the Philippines. If you look hard, I’m in the USO scene. Most of the other “GI’s” in that scene were European and Australian hippies rounded up from the Youth Hostels of Manila by Francis Ford Coppola’s agents. Good luck, though. I was a lot younger and thinner then.

Ilene: Thanks a lot. It’s been great talking to you.

 

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Sat, 10/03/2009 - 16:42 | 87783 mikeyv1970
mikeyv1970's picture

I am curious why he only see's as minor regional banks going bust or the idea that another major bank (JP Morgan or BofA) could not fail?  Other than a couple of other minor questions...seems to be pretty damn good.

-Michael

Sat, 10/03/2009 - 17:43 | 87820 nhsadika
nhsadika's picture

JPM owns much of the NY Fed.  So one major owner of the Fed, will do what it takes to ensure the light of day never reaches the bank from Fed.  Of course, the Fed will repel all attempts at transparency of its elite member banks - especially JPM. And the member banks (especially JPM) of course being the owners of the Fed, will not want any transparency on the Fed.   How JPM and the Fed work together is to me a blackhole of derivatives and secrets, and I am sure a matter of national security. Good luck Ron Paul.

BofA may not be so lucky. 

Sat, 10/03/2009 - 19:15 | 87866 deadhead
deadhead's picture

i could certainly be wrong here, but I thought that BAC had the largest ownership in the fed.  i stand to be corrected.

Sat, 10/03/2009 - 18:15 | 87843 ilene
ilene's picture

Hi Mike, I believe his reasoning is that the gov't won't let it happen, if it happens anyway, this would mean the gov't itself is imploding...

Sun, 10/04/2009 - 00:06 | 88019 Hephasteus
Hephasteus's picture

With a central bank strapped to a government using suicide notes and blackmail letters you can't destroy the big banks without destorying the government or without a huge massive tax revolt.

Sun, 10/04/2009 - 03:55 | 88089 Keyser Soze
Keyser Soze's picture

Wells?

Sun, 10/04/2009 - 09:36 | 88137 Anonymous
Anonymous's picture

Interest rates are going to go through the roof..

Sat, 10/03/2009 - 16:45 | 87785 ShankyS
ShankyS's picture

Look, I don't mind reading ZH till my eyes fall out of my head, but this is getting a bit ridiculous. Why don't you guys take the rest of the weekend off so I can catch up?

 

 

Sat, 10/03/2009 - 16:52 | 87791 mikeyv1970
mikeyv1970's picture

Now Shanky I just got done putting a LOT of insulation in my attic and I have to do something to educate my mind a little!  There are a couple of damn good guest posts on here that are insightful AND make you think.  Keep up the good work Tyler and Marla!  Shanky...hope you are doing well....

-Michael

Sun, 10/04/2009 - 13:10 | 88253 gmrpeabody
gmrpeabody's picture

+10

Sat, 10/03/2009 - 17:14 | 87803 Anonymous
Anonymous's picture

Someone intelligent that speaks positively about Pres. Obama, bet that will upset the lesser evolved.

Sat, 10/03/2009 - 21:56 | 87952 MountainHawk
MountainHawk's picture

Obama / Bush...doesn't matter to me... both evil in their own rights. Except w/ Bush he didn't try to hide it...

Sun, 10/04/2009 - 09:43 | 88139 Anonymous
Anonymous's picture

While you marvel in your mutation, no doubt. I will admit, hearing praise for Obama from someone who is intelligent is change I can believe in.

Sun, 10/04/2009 - 13:45 | 88279 Gordon_Gekko
Gordon_Gekko's picture

I'm not sure it "upset" anyone, but given his statements about Obama, I do have my doubts as to the soundness of the rest of his advice and judgement. 

Sun, 10/04/2009 - 21:25 | 88485 Anonymous
Anonymous's picture

And your advice and judgement have been so spectacular. For someone who has been wrong as often as you, it pretty much is a ringing endorsement of this guy.

Sat, 10/03/2009 - 17:22 | 87811 Phil Gramm
Phil Gramm's picture

Don't worry, we will be "Ba Ba Bombing Iran" here shortly which will instigate World War 3. The funny thing is this: it will happen under Mr. Obama's watch, not Mr. McCain's.

WW3 has been planned to be different from WW2 which had only 2 theatres. WW3 will have multiple theatres which will fully destabilize the world economy. The players and the alliances have yet to be fully defined. You can bet that Russia and China are itching to show their military might no matter the cause. Nevertheless, it will be started and ended by this great nation.

What is the point? The point is to reset the world economy. The USA is too far in debt to ever recover from it. Ideally China will be "reset" back to where they belong amongst the other cheap Asian nations.

You may have remembered me speaking positively of the economy prior. Well boys and girls, I have sold all of my stocks  and now I can say whatever the **** I want to.

-- Phil

Sat, 10/03/2009 - 17:33 | 87817 MsCreant
MsCreant's picture

Hi Phil,

How are we gonna fund the war do ya figure?

Sat, 10/03/2009 - 17:45 | 87822 nhsadika
nhsadika's picture

A matter of national security.

Sat, 10/03/2009 - 18:00 | 87836 Miles Kendig
Miles Kendig's picture

The same way these past few months have been funded.  Out of thin air.

Sat, 10/03/2009 - 17:53 | 87825 digalert
digalert's picture

I agree that we'll probably be at war. Not sure about Oblame, the guy seems to be dissing our allies while chumming with dictators. The dollar will either be a spark or fuel for this war.

Sat, 10/03/2009 - 21:57 | 87954 torabora
torabora's picture

Will AF1 go missing to trigger WW V (cold war = WWIII; GWOT = WW IV)?

Sat, 10/03/2009 - 19:18 | 87871 deadhead
deadhead's picture

Phil...you've been absent to long, good to see you back.

the one item i'm not sure about is the whole russia military thing....I thought the deal with the russians was that they are just going to sit back and ring the oil cash register.

Sat, 10/03/2009 - 20:25 | 87902 Anonymous
Anonymous's picture

"You can bet that Russia and China are itching to show their military might no matter the cause"

Uhm, no, you see, Russians don't think like stupid Americans.

Sun, 10/04/2009 - 10:01 | 88148 Thoreau
Thoreau's picture

+1

Sun, 10/04/2009 - 10:14 | 88152 estaog
estaog's picture

The chinese are finally lifting themsleves out of poverty and many of them are getting relatively rich and enjoying their new improved lives. Considering that the country is holding together fairly precariously, why the hell would they want to go to war with anyone?

If there is a war, they will not be the ones to start it. Status quo seems to be working out quite nice for them.

 

As for Russia... who knows.

Sat, 10/03/2009 - 17:56 | 87828 Hansel
Hansel's picture

It's true.  Opinions are like assholes...  I wouldn't recommend the leveraged etfs to anybody.  Banks may be necessary, but the current slew of banks aren't.  Obama didn't save the world.

Sat, 10/03/2009 - 17:57 | 87831 AN0NYM0US
AN0NYM0US's picture

+1

Sun, 10/04/2009 - 13:28 | 88265 gmrpeabody
gmrpeabody's picture

+10

Sat, 10/03/2009 - 18:05 | 87829 Miles Kendig
Miles Kendig's picture

My goal in life was always to get in the way of history, and let it run me over. It’s been an amazing life. I wouldn’t trade it for anything.

Concur.  I would like to read his version of a Kendig manuscript.  Too bad he would never be able to bring himself to actually do it.  Being able to say he has had the connections appears to be the important thing.

Sat, 10/03/2009 - 17:56 | 87830 AN0NYM0US
AN0NYM0US's picture

seems to be from the Julian Robertson as opposed to the Rosenberg camp

I'm glad he stated he was politically neutral because otherwise I would never have guessed that:

"He (Obama) really did inherit a bad hand.  If he did nothing, we’d be in a depression by now, with 25% unemployment. He understands what he’s doing and understands the risks. He has great economic advisors."

Sat, 10/03/2009 - 18:00 | 87835 ZerOhead
ZerOhead's picture

You bastard... you beat me to the punchline...

Sat, 10/03/2009 - 19:46 | 87881 Daedal
Daedal's picture

Sad how seemingly intelligent people can't reconcile their political views with reality. His assessment of the economy and investing theory is in complete contradiction with his opinion of Obama's economic policies.

Sun, 10/04/2009 - 03:33 | 88083 i.knoknot
i.knoknot's picture

this assumes that they're trying to 'fix' things... as most of us suppose would be rational.

i'm looking at SS, medicare, medicaide, and k.denninger graphs and don't think it *can* be fixed. So it becomes a function of deferral. That said, perhaps his advisors are good.

scary.

Sat, 10/03/2009 - 17:59 | 87833 ZerOhead
ZerOhead's picture

"The only way out of this is for the economy to return to a long term 3%-4% growth rate. That’s obviously what Obama is hoping for with his programs. He’s taking big risks, but he doesn’t have much choice. He really did inherit a bad hand.  If he did nothing, we’d be in a depression by now, with 25% unemployment. He understands what he’s doing and understands the risks. He has great economic advisors. "

Now I feel a whole lot better... think I'll put CNBC back on... 

Sat, 10/03/2009 - 20:00 | 87889 Great Depressio...
Great Depression Trader's picture

ZH is probably trying to hedge its bets by putting different viewpoints on the site. Until now most articles were extremely bearish. Lately ive seen more moderate views.

With regards to the 3-4% growth i just dont see that happening. Unemploment is at 17% as it is with all the stimulus and bailouts so when the first round wears off get ready for stim II. Bond market going to get killed so TBT is a great long term (2-4YR) bet.

Sat, 10/03/2009 - 20:36 | 87913 ZerOhead
ZerOhead's picture

I do love diversity... the echo chamber thing isn't all it's cracked up to be.

If you net out the MEW's from 2000 to 2007 (($200B/yr) which have come to a grinding halt)... and adjust the inflation stats to reflect reality (Shadowstats)... you find that this decline we are currently in has been ongoing since 2001.

There is no new engine of economic recovery on the horizon... Obama admitted as much himself.

Banks aren't going to lend us our money until they see the bottom which will still be a long time from now. 

Consumers have drawn so much demand forward and are so tapped out and frightened anyway... don't look for real consumption to increase anytime soon.

Other than increased government expenditures (and offsetting crippling future debt) there is no way you can get 3-4% growth. That is a halucination.

The increasing levels of unemployment will only bestow a further tax burden on those with employment.

CRE and $500 trillion in swaps are still ready to implode.

Conservative calculations call for over $30 trillion in new gov. debt globally over the next 5 years to finance budget shortfalls... yet it will all likely be printed since it's not there to borrow... and yes eventually the bond market will be slaughtered.

I could list a dozen or more points... but why bother.

The question is when and how this all ends.

 

Sun, 10/04/2009 - 00:31 | 88027 MsCreant
MsCreant's picture

"MEW's"

Kitty!

Sun, 10/04/2009 - 00:50 | 88037 Lothar the Rott...
Lothar the Rottweiler's picture

LOL  Nice touch, MsC.  :)

Sun, 10/04/2009 - 18:24 | 88407 ZerOhead
ZerOhead's picture

MEOWS = CAT!

But good one!

Sun, 10/04/2009 - 18:44 | 88413 MsCreant
MsCreant's picture

Perhaps you are not so dainty a cat, particularly if you have to deal with rottweilers such as the one posting above you, but liddle kitties do say mew. I have a kitten, 7 months, 10 lbs already! Vet says he should be 14 or so full grown. He kinda chirps too.

I loved Bill the cat. Used to have a tee shirt with his image. It was known by all as "Bill the shirt." Wore him till he had holes in him. [Sigh].

I really like how you have written your O to reflect his odd sized eye. Nice character you have put together there. Creative. Enjoy your posts too.

Mon, 10/05/2009 - 15:44 | 89103 ZerOhead
ZerOhead's picture

Thanks Mizzy...

The 'O' was an accident however...  I looked down to pick up the joint that was singeing the fur near my jewels and hit the Caps key by accident.

Sat, 10/03/2009 - 20:53 | 87928 ZerOhead
ZerOhead's picture

Guys... I really want to believe that things will get better... I really do.

The company I work with has over 300 industrial and commercial tenants... and strangely enough I consider myself an optomist. But I see what I see and I hear what I hear... and it's not good.

That's all. Rant over.

 

Sun, 10/04/2009 - 01:30 | 88052 Hansel
Hansel's picture

Is TBT a great long term bet like SRS is a great long term bet?  Time decay will kill TBT in the long term.

Sun, 10/04/2009 - 12:27 | 88221 McGriffen
McGriffen's picture

TBT should be tradeable...is the 10yr UST really going to straddle 3% or less for very long? I kinda doubt that.

Sun, 10/04/2009 - 12:42 | 88230 milo
milo's picture

Hansel,

IMO, there are no levered ETF's that classify as 'good long term bets'. They are vehicles that are best utilized to capitalize on a 'swing trade'. 

The professionals take positions in the futures (long puts on long dated 10 years) and short the ETF as a hedge.

Since the ETF's are based on the daily price moves, the opening prices are pushed around thereby capping the 2X correlation to the underlying. 

It's like the late trading in mutual funds that used to occur only now in the retail populated leveraged ETF's.

cheers

 

Sun, 10/04/2009 - 20:46 | 88463 Anonymous
Anonymous's picture

Theres a new treasury short without the leverage TBF

Sat, 10/03/2009 - 23:11 | 87996 michigan independant
michigan independant's picture

+10

Sat, 10/03/2009 - 18:40 | 87853 Anonymous
Anonymous's picture

17% mortgages? You'll be seeing a whole lot more downside than 10%.

Sat, 10/03/2009 - 18:44 | 87854 ozziindaus
ozziindaus's picture

I've heard "L", "V", "W" and now "√". Too middle of the road for me man. I need more juice than that.

Sat, 10/03/2009 - 20:05 | 87892 PolishHammer
PolishHammer's picture

He's talking from both sides of his mouth.

 

Weak interview IMO

Sat, 10/03/2009 - 22:00 | 87957 MountainHawk
MountainHawk's picture

Yea..he went gangsta w/ that square root prognosis... "West Siiiiiiide"

Sat, 10/03/2009 - 23:55 | 88013 Circumspice
Circumspice's picture

Little do they know, but the recession will actually be O-shaped.

Sun, 10/04/2009 - 17:38 | 88389 Anonymous
Anonymous's picture

And now you will hear about the impervious "X" shaped recovery argument where certain stocks continue to collapse and die out (the weak hands) while others continue their upward mobility and bull market trend (the strong hands).

"X" shaped recovery is the only darwinian truth. Not everyone will make it, save the strong, savvy and well connected.

Liquid

Mon, 10/05/2009 - 02:19 | 88608 agrotera
agrotera's picture

LUV  X  W =?

(what is W? and all you need is LUV...OK is late and hearing that the recovery would be a square root just made me goofy.)

Sat, 10/03/2009 - 18:50 | 87856 Anonymous
Anonymous's picture

"The only way out of this is for the economy to return to a long term 3%-4% growth rate. That’s obviously what Obama is hoping for with his programs. He’s taking big risks, but he doesn’t have much choice. He really did inherit a bad hand. If he did nothing, we’d be in a depression by now, with 25% unemployment. He understands what he’s doing and understands the risks. He has great economic advisors."

It's official: The paragraph above is the longest string of nonsense that I have read on ZH. The 2 subsequent paragraphs were of similar absurdity.

Sun, 10/04/2009 - 05:25 | 88107 jdun
jdun's picture

Obama is narcissistic. He has no understanding of economics. His team has no understanding of economics.

 

Sat, 10/03/2009 - 19:04 | 87861 Cheeky Bastard
Cheeky Bastard's picture

i predict a Y-M-C-A recovery

Sat, 10/03/2009 - 19:48 | 87882 Daedal
Daedal's picture

I predict a carrot-top recovery.

Sun, 10/04/2009 - 01:04 | 88043 Hephasteus
Hephasteus's picture

I predict A little shop of horrors recovery. Lead by geeky canadian Rick Moranis. Geeky canadians for the win.

http://onceuponawin.com/2009/10/01/win-pics-little-shop-of-horrors/

Sat, 10/03/2009 - 23:22 | 88001 Sqworl
Sqworl's picture

I don't know what country you live in, but in the US, the unemployment is at +20%.  I expect it to get worse, unless we allow those pigs in the house to screw us with Obamacare, then they will put everybody back to work.  digging graves.

In the meantime, Im just waiting for an Event at 85 Broad.

Mon, 10/05/2009 - 02:20 | 88609 agrotera
agrotera's picture

OK now we're talking!

Sat, 10/03/2009 - 19:23 | 87873 SpartanTnT
SpartanTnT's picture

The toilet bowl recovery shape once described was the best.

Sat, 10/03/2009 - 19:37 | 87878 deadhead
deadhead's picture

+1....I recall that!

Sat, 10/03/2009 - 19:49 | 87883 RobotTrader
RobotTrader's picture

Anyone who has been long TBT must be a masochist.

 

Sun, 10/04/2009 - 03:36 | 88085 i.knoknot
i.knoknot's picture

don't even think about the SRS graph. I remember not-so-long-ago when "support" in the $69 range made it tempting...

heh

Sun, 10/04/2009 - 13:38 | 88274 gmrpeabody
gmrpeabody's picture

ROTFLMAO...

I remember explaining to my wife, that if it falls back to $70, it might be a  good buy. (goodbye to my money)

Thank God I got over that without much bloodshed.

Sat, 10/03/2009 - 20:02 | 87890 Green Sharts
Green Sharts's picture

Anybody who stays long a leveraged ETF for more than a few days doesn't know what they're doing.  It doesn't matter if you're directionally right over the long run, the longer you stay in them the more volatility will eat your returns.

Sun, 10/04/2009 - 09:03 | 88129 Anonymous
Anonymous's picture

WRONG!!!!!! Leverage ETF's are PERFECT!! If you know what to buy when to buy!! Of course they are not design to be hold as Mutual Funds,but you can hold them as long as the trend that you are betting on is in place....

Sun, 10/04/2009 - 19:34 | 88424 pivot
pivot's picture

do the math anon.  you're actually not correct.  unless the mkt goes one direction day after day after day, your returns do get eaten by volatility, regardless of whether you are directionally "right".  If you don't feel like doing the math, then just pull any number of charts from the past and realize that point to point, you do not get the advertised leverage over any length of time, which therefore defeats the purpose of owning these.  They are great for daytraders and that is it. I basically stopped reading this "mad hedge fund" person after he stated that because no real money manager would ever recommend such a ridiculous move.  this guy clearly doesnt know what is going on in the world.

Sun, 10/04/2009 - 22:10 | 88502 Green Sharts
Green Sharts's picture

To illustrate what a losing longer term proposition the leveraged ETFs are, check out the 1 year performance of the 2X financial long and 2X financial short.  On a 1 year basis, the holders of each got whacked by almost the exact same amount.

http://finance.yahoo.com/q/bc?t=1y&s=SKF&l=on&z=m&q=l&c=uyg

Mary Schapiro claims the #1 mission of the SEC is to protect the interests of small investors.  If that was the case, leveraged ETFs wouldn't exist.

Sat, 10/03/2009 - 20:03 | 87891 Anonymous
Anonymous's picture

The guy is taking so many positions, from gas, oil, dollar, gold, OH MY.

Seems arrogant, self-contradicting. Sweeping statements.

No thanks, pass on this buffoon.

Sat, 10/03/2009 - 20:19 | 87897 Anonymous
Anonymous's picture

Have been reading madhedgefundtrader for about 6 months now, this guy is on point and humorous too.

To some of topics above, when you "fund" a war it doesn't come down to dollars and cents but volunteer of labor and there seems to be a lot of cheap labor being created...

Sun, 10/04/2009 - 16:06 | 88354 PolishHammer
PolishHammer's picture

If he's a shining example of a hedge fund manager then it's not surprising they all underperform sp500

Sat, 10/03/2009 - 20:50 | 87926 Anonymous
Anonymous's picture

I am unimpressed with this trader. "Appreciated by an average of 400%" since early 2009.

Yeah right. Are these returns audited? Have they been listed the website?

What about the trading record of his last 5 years? Ten? Not available?

Sat, 10/03/2009 - 21:18 | 87938 buzzsaw99
buzzsaw99's picture

When I bought my first home in New York in the early eighties, I got nailed with a 17% interest rate on my mortgage. We may revisit those levels...

LULZ!! LOLZ!! LMAO!!

When, in the next millenium? HAHAHAHAHAHAHA!! :gasp: HAHAHAHAHAHAHA!!

Sat, 10/03/2009 - 22:03 | 87960 ZerOhead
ZerOhead's picture

Remember this post Buzzy... and keep your eye on the 30 years.

Sat, 10/03/2009 - 22:07 | 87965 buzzsaw99
buzzsaw99's picture

I will do both if you will remember that I wrote this:

LULZ!! LOLZ!! LMAO!!

When, in the next millenium? HAHAHAHAHAHAHA!! :gasp: HAHAHAHAHAHAHA!!

Sat, 10/03/2009 - 22:34 | 87980 ZerOhead
ZerOhead's picture

With a face like yours how could I forget...

You little cutie you!

Sat, 10/03/2009 - 23:10 | 87995 buzzsaw99
buzzsaw99's picture

Flatterer.

Sat, 10/03/2009 - 23:35 | 88009 Cheeky Bastard
Cheeky Bastard's picture

you have a purty mouth 

Sun, 10/04/2009 - 00:35 | 88028 MsCreant
MsCreant's picture

The three of you need a hotel room. No PDA on the comment board.

Sun, 10/04/2009 - 01:01 | 88040 Hephasteus
Hephasteus's picture

I support this Archvillian and psychic gut baby cockblocking.

Sun, 10/04/2009 - 03:19 | 88082 MsCreant
MsCreant's picture

I think I am infected with something. I keep coming back to look at your comment and cracking up. Jeeezuz. Gawwwd. ROFLMFAO

Sun, 10/04/2009 - 23:36 | 88550 Anonymous
Anonymous's picture

What exactly is a gut baby? What is Cock Blocking?

Mon, 10/05/2009 - 03:52 | 88628 Hephasteus
Hephasteus's picture

Buzzsaw99's avatar is the psychic talking gut baby from the movie Total Recall. Cheeky bastards is the Joker painted on barrack obama from the movie Dark Knight. Cock blocking is interfering between a relationship because you believe that it will be harmful for one or both of the parties.

My statement was simply a joke because really what good could come from mating a chaos loving arch villian with a psychic gut baby.

Sat, 10/03/2009 - 22:03 | 87959 Lothar the Rott...
Lothar the Rottweiler's picture

I suppose this post proves I'm not that much of a ZH groupie as others have claimed.

Nothing wrong with the interview at all, but the interviewee's answers, well, don't think I agree with him too much.

Or not enough to make Felix Salmon happy. :)

Sat, 10/03/2009 - 22:15 | 87962 AN0NYM0US
AN0NYM0US's picture

I had the pleasure of watching BBCs "World Debate" featuring Niall Ferguson: Financial and Economic Historian - Christine Lagarde: French Finance Minister - Jim O’Neill: squid - Güler Sabanci: Chairwoman of Sabanci Holding and Dominique Strauss Kahn: The IMF’s Managing Director.

It is not yet on video but will be replayed on BBC at the following times:

http://www.bbcworldnews.com/Pages/ProgrammeMultiFeature.aspx?id=196

Apart from Ferguson (who offers an honest and insightful perspective) it was some scary stuff - the body language from some of the others while Ferguson was speaking said it all. If you have the chance this is a must watch - I can't emphasize enough the arrogant scorn in the eyes of Strauss-Kahn and squid towards Ferguson. I will try and capture and upload to youtube if I have time. 

Here is a photo of the session  with Strauss-Kahn sitting next to  squid

http://www.daylife.com/photo/02Zf3sd6fX220?q=Goldman+Sachs

Sat, 10/03/2009 - 23:24 | 88004 Miles Kendig
Miles Kendig's picture

Great play.  Thanks

Sun, 10/04/2009 - 04:19 | 88096 chindit13
chindit13's picture

Thanks for the heads up.  I had a chance to watch it and found it both amusing and somewhat frustrating. 

Amusing was listening to Niall Ferguson and watching the panels' reaction, particularly when he made cuts at Goldman.  Also amusing was GS economist O'Neill shuffling in his seat as he tried to justify Goldman's reason to be.  Clearly he is well aware that his firm is not a "force for good" as the PR says, but really just a giant self-serving hedge fund with a taxpayer put.

Frustrating was the view by almost all that the worst is over, that China is an engine of growth, and the usual pablum about how "we all have to work together", as if the world ever has or ever will.

Watching the show I realized that my own view of the cause of the crisis is completely different from these experts.  I feel they are looking at symptoms and viewing them as causes.  The real cause, in my view, is global overcapacity and simply far more people walking around than the planet can reasonably use.

The debt build-up was merely a method of postponing the day of reckoning, because it created the credit needed to produce the output of people the world doesn't really need.  The world hit the limit of its ability to service the debt, so the whole machine stopped.

Obviously if I am correct, there is no solution.  None.  At least none that is not Malthusian. 

The manner in which the various countries have attempted to address the crisis is almost farcical.  It is the proverbial idiot's behavior of repeating the same mistake hoping for a different outcome.

Though it has been covered ad nauseum, I'll repeat:

---the West suffered from too much debt and TBTF institutions, but responded with more debt and mergers.

---the East---in particular China---suffered from overcapacity, but responded by providing credit to increase productive capacity.

So maybe time has been bought, but to what end?  The overcapacity is still there, yet there are billions of wannabe consumers who first need to obtain wealth via the production of something someone else both wants to buy and can afford to buy.

The obvious but most chilling statement on the BBC show came from Niall when he noted that poorly educated workers in the West have been hammered by events into irrelevancy, and they serve almost no purpose.  They offer nothing to society in terms of their work output that cannot be obtained somewhere else for a tenth of the price.  As they are a significant number, and reside in democratic countries, what they might be able to do at the voting booth has serious implications for social stability.

Sat, 10/03/2009 - 22:26 | 87975 Printfaster
Printfaster's picture

I am thinking of the Wile E Coyote recovery.  The Greek letter capital Gamma recovery Γ

Sat, 10/03/2009 - 22:44 | 87982 Miles Kendig
Miles Kendig's picture

In a certain style of shorthand, the symbol for bank is quite similar except the drifting line runs from about half way up.  Appropriate none the less.

Sat, 10/03/2009 - 22:27 | 87977 waterdog
waterdog's picture

Marla, please send me a t-shirt made from H2SO4 and lined in gold and I will use it to kill myself. You guys do not have to do it for me.

Sat, 10/03/2009 - 22:50 | 87986 Anonymous
Anonymous's picture

Market isn't up 50% "since Obama took office". It's up 50% since the March lows. Up 12% since he took office. Down 1.5% since he got elected.

Sun, 10/04/2009 - 00:06 | 88020 Anonymous
Anonymous's picture

> The stock market is up 50% since Obama took office

No, it's up 11% since he took office. It's up 50% since the lows after he took office.

And regarding TBT, many of these leveraged and/or short ETFs have significant tracking errors that often work against long-term holders. Probably better to short TLT to achieve the same effect (minus the leverage but that's a feature because this is by no means a sure-fire bet).

Sun, 10/04/2009 - 01:07 | 88044 Anonymous
Anonymous's picture

tbt (and every other levered etf i've looked at) is a badly flawed instrument if you plan to hold it more than one day. tbt will develop serious tracking errors over time because the fund is re-levered *every* day. good for daytrading or short term momo trading (but only if your timing is impeccable).

anyone who recommends a levered etf as an "investment" should not be taken seriously. a recommendation like this shows that someone hasn't done his homework, or is simply stupid.

Sun, 10/04/2009 - 02:18 | 88065 Anonymous
Anonymous's picture

it is an inverted square root recovery

Mon, 10/05/2009 - 02:24 | 88610 agrotera
agrotera's picture

By jove Anony, i think you've got it!

Sun, 10/04/2009 - 03:09 | 88076 Grand Supercycle
Grand Supercycle's picture

" a 1 in 3 chance for new lows"

I think its a 100% chance.

MORE:
www.zerohedge.com/forum/market-outlook-0

 

Sun, 10/04/2009 - 04:28 | 88098 Anonymous
Anonymous's picture

A good one to follow...

Sun, 10/04/2009 - 08:13 | 88122 ToNYC
ToNYC's picture

Can't we all just be happy being Anonymous? The glory hole of introducing information keeps the air pure of noxious self-service. I for one don't need to hear of grand strategies from this or that one guru who has it all figured out. I just want to ride a winner when whatever I stumble into seems to be working and I'm not stupid enough to question the ride when it did not come preceded by a pedigree or other logical illustration. One or two great rides a year is way better than a thousand taxable and commished turns on the carousel or teeter-totter. For what it is worth, we might be involved in a Hyperbolic recovery in terms of real P/E and the y-axis will be the point of inflection/phase change as in 1/x as x is waning, until there is some profound efforts to incentivize the growth of small businesses which have been the most reliable source of real employment. Government quick-fixes are always only wound dressings that rip the healing skin off at unintended consequences time.

 

Sun, 10/04/2009 - 10:31 | 88157 Anonymous
Anonymous's picture

This will be a "/\__" recovery.

Sun, 10/04/2009 - 11:41 | 88197 MsCreant
MsCreant's picture

Nice one, #88157.

I'll see your "/\__" recovery and raise the bar to just where it should be, the final word on the topic... are you ready for it?

 

This will be a "?" recovery.

 

Damn that was good. You know I got my zen on this morning, coffee coursing through my veins. Booyah!

Mon, 10/05/2009 - 02:26 | 88612 agrotera
agrotera's picture

Nice work MsCreant!

Sun, 10/04/2009 - 12:12 | 88213 Sqworl
Sqworl's picture

( * ) Recovery!

Sun, 10/04/2009 - 13:04 | 88242 MsCreant
MsCreant's picture

Okay, your recovery trumps mine. That's what I get for being arrogant.

Did you see the pics we posted for you? I'll have to go see which thread. Hmmm...

Sun, 10/04/2009 - 13:02 | 88244 MsCreant
MsCreant's picture

You left the comment that urine was a nice touch to add to a fire we were talking about that needed setting...

But I don't remember where that was...

Sun, 10/04/2009 - 13:19 | 88260 Sqworl
Sqworl's picture

LMAO...Hartz makes a spray which nuetralizes the stench of urine. I used the whole bottle on Pure Evil creepy cat!!  In a perfect world I could spray washington with this potion!

Im ready to move back to Californication...I hear they drug you and screw you...and its ok.

Sun, 10/04/2009 - 18:32 | 88411 Anonymous
Anonymous's picture

Zero hedge is turning into Money Magazine printing stuff like this. Everything is wonderful in the best of all possible world's. Voltaire would be nauseated.

Morgan

Sun, 10/04/2009 - 18:58 | 88417 milo
milo's picture

"@" shaped recovery, as the liquidity plug gets pulled.

 

Mon, 10/05/2009 - 02:33 | 88614 agrotera
agrotera's picture

.

Mon, 10/05/2009 - 10:18 | 88788 Anonymous
Anonymous's picture

After having seen Zombieland this past weekend I think that a bad burger, mad cow gone hyperbolic Zombie outbreak is just the kind of global economic reset that could get us back on our feet in the long run....

Mon, 10/05/2009 - 12:10 | 88917 Daedal
Daedal's picture

...and a stimulus for the Twinky industry.

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isolinx's picture

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