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Technical Analyst Charles Nenner Predicts the Market May Crash in April
After much pleading and cajoling I managed to get a no-holds-barred, no stone unturned, 40 minute interview with technical analyst to the stars, Charles Nenner of Charles Nenner research in Amsterdam, for Hedge Fund Radio. Bottom line: A second deflationary tidal wave may hit the US as early as April. The Dow could crash, possibly heading for a double bottom at 6,000, and bonds could go up for the rest of the year. Oh, and by the way, crude oil futures are discounting way with Iran by 2013!
Once this deflationary scare burns out, the greatest trade of your lifetime will set up, says Charles. This is the one where you pile on the leverage, take out a home equity loan to get a still bigger position, and max out your credit card to cover your living expenses. Get it right and you’ll never work another day again, you can pay off your home mortgage, and get a building named after you at that college you can’t stand. The bad news? This trend could start tomorrow, or in two years. Blow your entry point, and you’ll get wiped out.
Since Charles has had a particularly hot hand lately, calling the top in the US stock market within four days, months in advance (click here for my December 12 interview with Charles at http://www.madhedgefundtrader.biz/Charles_Nenner.html ), he has major hedge funds relentlessly banging on his door for his next call. I managed to track him down late last night at his home in Amsterdam, where I extracted an update on his global view.
Charles is talking about shorting the 30 year Treasury bond, a trade I’ve been yammering on about for the last several months, and seems to be on the verge of breaking a 29 year bull market trend line. The yield on this paper, now at 4.55%, will gyrate between 4.25% and 5.07% for the next year. Then sometime in 2011 we will break out to 7.5%, possibly very quickly. That would take the bond futures from 119 today to as low as 82.
But that’s just the opening act. Once inflationary fears take hold, the 30 year yield could fly as high as the November, 1981 high of 13%, bringing the futures down to 53. The Armageddon scenarios you hear about today could take it lower still. And this is all in a contract with a margin requirement of only $3,240 for a $100,000 position, giving you 30:1 leverage. No wonder the big hedgies are salivating.
Keeping this interest rate scenario in mind, I then pinned the erudite Dutchman down to calls on every other major market. The S&P 500 may grind back up as high as 1145, and then the next big move is down. The dollar is over extended here, but he sees it eventually moving to $1.18 against the Euro. The yen is ready for a big move down after peaking around here, initially targeting ¥105. Traders should take profits in the Ausie/Euro cross at 68 by May. Crude will peak in the low eighties by the end of March, and then begin a one year decline. Copper could also peak then at $3.73. Gold has peaked already, with Charles bailing on his longs at $1,220/ounce, and we are now in a downtrend that will last for some time, until the above mentioned inflation fears kick in and take it to new highs. Natural Gas looks terrible, having just peaked at $6/MCF. It’s headed downtown, first to $3.80 and then to $1.70. Gulp!
What is the one trade that Charles would put on today? Go long the Ausie/Yen cross, where you go long the Australian dollar and short equal value of Japanese yen at today’ price of $AUS 0.80. Charles’ calls were so hot, my hand was sizzling when I finally put the handset down.
Charles has a long career that includes stints at medical school, Merrill Lynch, Rabobank, and 12 years at Goldman Sachs. He has spent three decades developing his proprietary Cycle Analysis System, which generates calls of tops and bottoms for every major market in the world. Charles developed a huge following after 2007, when he accurately nailed the top in the Dow at 14,500 and urged his clients to put on short positions when everyone else was predicting that the market would keep grinding higher. I have been following Charles daily research reports myself for two years, and found them to be uncannily accurate. Today, Charles Nenner counts major hedge funds, banks, brokerage houses, and individuals among his clients. You can find out more about Charles’ work at his website at www.charlesnenner.com.
To catch my entire sizzling interview with Charles Nenner, please go to www.madhedgefundtrader.com/ and click on the “Today’s Radio Show” menu tab on the left. This will no doubt be the hottest show of the year.
For more iconoclastic and out of consensus analysis, you can always visit me at www.madhedgefundtrader.com , where the conventional wisdom is mercilessly flailed and tortured daily.
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At the golf course I play at, they laid off half the employees, and advertised for volunteers to take their place. They offer the volunteers free golf for working 12 hours per week. We have quite a few retirees here, so they filled most of the "positions" in about a month. "Will work for golf" is alive and well in AZ.
Unemployment is in the 20% range around here, due to the bust of the housing bubble. Many unemployed construction workers are panning for gold to supplement their UI.
Until the lost revenue from the volunteers begins to show in cash flow. Golf clubs are generally not run by competent money people. They don't plan well for downturns and react too slowly to reality. My experience, anyway.
Holy cow! I would have gladly taken that for free golf.
I used to spend SO much money on golf! I know I spent more than 12 hours worth of wages a week working at a golf course during the summers...
There were some days where I'd hit 3 or 4 buckets a day at the driving range, and then play 3 or 4 times a week on top of that!
Of course, I haven't really played much since times got worse, but wow, I'd be right there, first in line to take advantage of that! Golf is the best sport in the world... and it's so great and relaxing...
Based on the current single membership rate, the 48 hours of labor works out to about $5./hour in benefit "pay" for the volunteers. So now they have 25+ volunteers where before they had 6-8 paid workers at $7.25/hour + golf benefits. Obama wants more volunteerism, maybe this is what he had in mind?
Future will be contained. Nothing bad will happen in near term.
Look trough the history. As long as we can feed people with the "hope" or "faith" ( anything) - we are good to prolong the agony. We will change the top and will blame on the previous one ( which is in other terms will renew the idea of hope).
And don't forget , then everything falls- we just simply will be pushing patriotism.
And pardon my spelling...
chasing bets of the hot gambler...
Sorry MHT,
that are very well hedged predictions.
It _could_ happen or it _might_ happen does not predict anything.
A timeline from tomorrow until two years in the future is useless.
I take the article as a possible scenario and will wait for confirmation.
The most useful news you report is that those financial wizards turn to somebody else for advice.
Leo, you are making the classic Krugman/Bernanke Keynesian error of confusing liquidity with capital. The idea that "if only we provide enough liquidity, prosperity will return" is simply wrong. People have to be willing and able to both borrow and to put the borrowed money to productive use to achieve prosperity. It's true that in the short-term, the liquidity, which will naturally flow to speculation, can make stock prices rise. But if the underlying economy is rotten, which ours is and would be absent 10% of GDP "stimulus" from the government, eventually reality will assert itself and the stock market will fall.
Sorry, but I am not one who believes that the answer to all our woes is more liquidity, but it buys time, and allows banks to slowly repair their balance sheets. There is simply way too much liquidity in the global financial system to see another stock market crash. That's all I'm claiming.
My dear Leo...Japan never repaired their balance sheets until Bill Seidman went over and forced them 15 years later to write that crap off. And as Reggie points out--it will take little to tip over the monsters this time with their derivative holdings--just a little mess and the world tippeth over.
So if you actually think repair is an option, great. But no one is repairing or lending anything.
+ 100. The derivatives are the straws meeting camel's back.
I , for one, think you're right. No crash imminent. Not while all this liquidity is sloshing around (but available to only certain circles).
liquidity in banks OH hurrah..so what!
where are the JOBS? What are we PRODUCING?
I apologize for the evident hostility in my words.It is not directed at any of you reading this.
BTW This is not mentally or emotionally healthy
to live under these stressful conditions .
i suggest we all do something fun today as well as give ourselves a moment to be thankful for what we DO have.
Here, here!
1) Laugh daily, as many times as possible
2) Smile consciously, even if you don't want to
3) Meditate
4) Breathe
5) Help somebody every day, go out of your way to do it
Life can never be easier.
Thats the problem with Junking the junkers JW n FL,
ya get junked yourself, just watch!
I think we should place a tariff on junking
We should really place a limit on each posters
junks per month. That WOULD make them valuable, info wise
We're going to have deflation AND 13% interest rates? Seems contradictory
Deflation of debt due to inflation? but the same ole' "Buy Gold"... is what he is pushing... Buy high to sell higher... ala Goldman or the others.... the value of Gold is? and the price of Gold delivered?
ETF Gold "Paper"? The Central Bank sometimes lends Gold, or it lends a claim to Gold. These are what our bullion dealer sells. And since most demand for Gold is not a demand for the physical metal but a demand for paper (forward, future, etc) claims to the metal, this mechanism can meet the demand without an undue strain upon the available supply of the physical metal, and the upward pressure on the price of Gold that would cause.
http://www.zerohedge.com/content/spot-gold-june-1-2010-200000
http://www.google.com/finance?q=NYSE:GLD
http://www.kitco.com/charts/livegold.html
Buy Low... Sell High... Buy High too sell Higher... risk verse reward? looking for a 20% pop in 6 months? The next Bull Run will be for the middle market, albeit years away and the middle market does not historically hedge... in gold.
Rates of 13% are impossible.
There is NO ACTIVITY in the US in the aggregate that can produce this profit margin.
Yields are declining and will continue to do so. Now, the effective inflation rate may look like we should have 13% yields, but only because the Fed is buying the coupon.
An interest rate of 13% is highly deflationary...that would suck the life out of any borrowing demand in existence. It's hard enough to move credit at 1% right now.
In this context 13% would be a measure of fears of default and/or high inflation. If the latter, there would be a lot of property speculation and the like to avoid holding dollars, and that would create wage inflation, the kind of evil cycle we saw during the Carter years.
Rates of 13% are highly possible...only if you factor in price AND wage inflation in the same rates....been there done that, believe me..It was called the 70s!!
yah....I remember that too. My net worth was about $58 bucks not including the old bucket I drove around in. Interest rates meant nothing to me.... zero net worth X 13% interest always equalled zero anyway.
For those in the "impossible" camp, consider the overwhelming debt financing requirements coming down the road in virtually every sector. Until the worldwide bad debt overhang is recognized and purged to manageable levels, ANYTHING can happen with rates.
http://www.latin-focus.com/latinfocus/countries/argentina/argcpi.htm
deflation = debt default, debt default = currency crisis, currency crisis = hyperinflation event and/or bank closure with forced currency devaluation. IMO we are within striking distance of a bank closure event here in the U.S.
See the graph. Be the graph. We are one with the graph. See those lovely two flirtations with deflation going into the crackup? #2 coming right up.
You hit it right on the head. We are going to have deflation and then hyperinflation.
Action = Buy physical gold.
Nothing wrong with holding gold (5% - 10% of your wealth) and cash, that´s what I do. Diversification is almost always smart. Yeah, I have stocks and a little real estate as well as corporate bonds.
All of us who like physical gold will likely be BIG winners in the end. Buy it, buy more if it goes down, and never sell.
Years from now quietly give it to your children and grandchildren.....
I agree somewhat, but it really depends on your time objectives.
Of course it will be worth more in 50 years or whatever when I have grandchildren.
Master Bates, yes i read the article and imho he is wrong on some points PLUS one needs to factor in things he did not write about within his article. Apologies as perhaps i should have posted more info as to WHY i said gold.
Of course none of us have a crystal ball to be 100% accurate 100% of the time, yet in the long run holding USA dollars is 100% the wrong investment as has been proven time and again in history. So yes i agree with you that "Of course it [gold] will be worth more in 50 years or whatever when I have grandchildren."
Yes, holding dollars and doing nothing is a big problem, because you will always lose to inflation.
My opinion though is that much of the inflation that will come in the future has already been priced into the gold market, and more. Of course, this is where our opinions differ.
My other argument is the opportunity cost that comes with tying up money in physical assets over a large period of time. This leaves you exposed to the market's fluctuations more than I would personally like.
Anyway, I agree with you in some ways, and disagree in others. It doesn't mean that I don't like you though. :)