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Watch Out for the “Anti-Growth” Trade!
Now that most big hedge funds have completed their race to get neutral, they are holding raucous in-house debates over placing size bets on a double dip recession. This would involve reversing every trade that I have been recommending for the past 18 months, in which the hedge funds have also been running gargantuan positions, flipping from longs to shorts.
On the table are new shorts in commodities, energy (USO), emerging markets (EEM), the industrial white metals of silver (SLV), platinum, (PPLT) and palladium (PALL), junk bonds (JNK), and corporate bonds. This view has traders going long the dollar and the yen (YCS) and shorting the euro (FXE), pound (FXB), and the commodity producing Australian (FXA) and Canadian dollars (FXC). Long positions would be established in the dollar, Treasury bonds, and volatility (VIX).
This is not exactly a low risk trade, as it goes contrary to every long term global macro trend currently in place. If you get the double dip recession that Europe, China, and more recently, British Petroleum (BP) are trying their best to deliver, they hit a home run. If the recent diabolical market action turns out to be just a vicious head fake, then they would be selling into a hole and getting killed on the next whipsaw. They don’t call these guys the Masters of the Universe for nothing.
After watching silver (SLV) and palladium (PALL) get absolutely creamed today, I just want to reiterate my warning (click here at http://www.madhedgefundtrader.com/April_28__2010.html ) the market now had vastly higher levels of risk, that there will be no place to hide in the following sell off, it is only those who believe in the Easter Bunny who think diversification will protect them, and that cash is best hedge of all. There were more 200 day moving averages broken this week that there are national Rifle Association bumber stickers at a Tea Party rally.
Stop losses and tight risk controls are the order of the day (click here for that advice at http://www.madhedgefundtrader.com/April_20__2010.html ) when “de-risking” is the dominant investment strategy, and bitter margin clerks are in the driver’s seat. For proof this is happening, you need look no further than the euro/yen cross, that great indicator of global risk taking, which has been in an absolute free fall for the last four weeks, to a gut churning ¥112. (For an explanation of why this is important click here at http://madhedgefundtrader.com/February_11__2010.html ).
It hasn’t helped that credit markets have once again ground to a halt. The IPO market has gone comatose once again. The cheerleaders at CNBC have gone back to looking like they have just been kicked in the balls.
You only need one ticker on your screen right now, and that is for the S&P 500 (SPX). There is now more open interest in the SPX puts than there was during the Lehman aftermath. Talk about closing the barn door after the horses have bolted. Technicians are talking about the first line in the sand at 1045. But I think that level offers all the support of a wet taco. If that doesn’t hold, then you can look at 950, which would give us a neat 22% pull back from the top.
To get below that and retest the 2009 low at 667, we need a second leg down in the real estate market, which would trigger a secondary banking crisis. I don’t buy the double bottom scenario, as we have still have zero interest rates, and because most of the big players who could go under are already gone. Greece and the euro crisis alone don’t have the juice to do this alone. But I could be wrong.
Suffice to say that you should only entertain the “Anti-Growth”trade if you run a global 24 hour trading desk, have a blind former frat brother for a margin clerk, and a Harvard educated legal department to make up the appropriate excuses when things blow up. Three year lock ups on client funds would also be good to have. If you don’t have all of this in place, then better to just read about it in the tabloids. The Internet is a great leveler, and enables legendary hedge fund trader, Paul Tudor Jones, and his 300 man staff to compete head to head against you. I can tell you who will win that one every time. I can’t wait to see who actually straps this one on.
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on the “Today’s Radio Show” menu tab on the left on my home page.
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Uhm, you're 3 weeks late dude!
Now we'll be doing the opposite
The Internet is a great leveler, and enables legendary hedge fund trader, Paul Tudor Jones, and his 300 man staff to compete head to head against you. I can tell you who will win that one every time.
Great point. My father, who grew up during the depression and never owned a stock in his life used to say to me: "You wouldn't go out to Yankee Stadium and expect to get a hit off a major league pitcher but you think you can compete with Wall Street and win." Not only do these guys have much more resources than we do, most of them would push their mother down the stairs to steal her last dollar.
Your father used to be a wise man .
We refuse to play that awful game any more : money is virtual, only air or mere paper junk and gold is a useless metal, not hard enough to make tools or weapons . Everything has the mere value that people put in it . Remember the children's tale : Beware, the king is naked !
Two years ago, we decided to get out from the grip of the financial world and become the true owners of our lives and decisions . Once the victims of the financial world , we have become the actors of our lives. All the bad news about euro and global financial disasters have very little impact on my neighbours' lives and mine in our ordinary French city .
Two years ago, together with three families in our neighbourhood, we bought a plot of very cheap unconstructible land by the river for 3,000 euros instead of renewing our old cars . We made a collective vegetable garden on it . We added a few fruit-trees to those that were already there to have an orchard . Next summer, we are building a poultry-yard to be totally independent for our food and a nice comfortable Mongolian yurt for a foreclosed family . The next step will be a solar electric system to pump water from the river.
At the moment, we only spend our money on food and equipment for future survival . We never enter a supermarket , we just buy from small independent local suppliers to help them survive and fight against big chain stores . We have no loans, no credit cards, no savings and we take our salaries or unemployment allowances away from the bank, as long as there is still money, ON THE VERY DAY the money arrives on our bank accounts. This way, we refuse to feed the greedy financial system.
We spend nice week-ends and holidays growing vegetables together, building useful equipment, having nice picnics together, even when it is rather cold . Friendly, nourishing , free leisure with friends , most enjoyable even for the children . We have nothing to lose, nothing to fear . We are ready for survival when the financial system fails.
Reminds me of my youth. Family, friends, good food. Simple times. Good times.
We are two middle aged couples with children and grandchildren and one young man with his girl-friend and a child . A young couple with children, about to be ejected from their foreclosed house, will join our group in june .
All of this assumes you are fully trained in home defense and willing to act if needed, right?
Of course we are . And we know quite a lot of angry people ready to join us . When more and more unemployed people in Europe, UK, the USA have nothing left to lose, what can Wall Street and bankers do against them ?
This site was recommended as a cure for depression. I think maybe I was mislead ;-)
man, you could get damages in that lawsuit... ZH may help your solvency, but certainly no cure for depression.
fuck the slv..they can do whatever they want to do with it..Physical has broken away from that crap.PHYSICAL Silver is now up to $26 an ounce local if you want it.There maybe alot of people jumping in the lifeboat thats the usd, but there are also alot of poeple jumping out of the boat into the water hoping to make it to dry land..
spot silver @ $26 / ounce? where?
gringo,
Yeah,me too, Where?, I have some I'll let go at that SPOT price.
Dow Theorist Richard Russell: Sell Everything, You Won’t Recognize America By The End Of The Year.
http://www.puppetgov.com/2010/05/20/dow-theorist-richard-russell-sell-ev...
Quote is incomplete.
"Sell everything...I'll buy right after"
Repite, lo siento.
Naw...
"Sell Everything, cuz I sold April 30 (Sell in May and go away) I'm in triple striped Shorts, and bought May, June, July puts."