madhedgefundtrader's blog

Was Japan’s massive $21 billion intervention in the foreign exchange markets the opening shot in a global attempt at quantitative easy in the run up to the November elections? The silver move suggests that the economy may be stronger than the “double dippers” realize. The asset class that has been trouncing all comers since 2000. (GLD), (SLV).

While the US can handily beat armies, defeating an idea is impossible. With the planet’s fastest growing population, Muslims are expected to double from one to two billion by 2050, the terrorists can breed replacements faster than we can kill them. The US will have to maintain a military presence in the Middle East for another 100 years. The goal is not to win, but to keep the war at a low cost, slow burn, over there, and away from the US.

Love them or hate them, they’re going to be around for another 75 years. From gilded blue bloods to “Mack the Knife” to the “suits” in one generation. Saving the firm twice. Successfully demanding a huge equity infusion from the Mitsubishi Group, while simultaneously holding at bay the wolves from Wall Street and Washington. (MS).

The hands on, from the trenches view from Oracle of Omaha Warren Buffet’s personal agent. The number of existing homes on the market is climbing from the current 4 million units to 5 million, versus a ten year annual trailing average sales of 2.5 million units. Record foreclosures are forcing reasonable sellers to compete against distressed sellers, driving prices down. The hurricane force headwinds of the retirement of 80 million baby boomers, the parsimonious attitude of banks, and the harsh reality of continued falling standards of living in the US aren’t helping. Do bank stock investors know this?

Silver is now trading at a 30 year high, is overbought, and bumping up against key technical resistance. Mean reversion can be a bitch. Making 13% in a zero return world. For those who hold physical bars and coins, just keep it locked up and throw away the key. Waiting for $50 an ounce. You can always use your silver dollars to bribe the border guards.

Sugar is up a blistering 33% in a month. The old Malthusian dilemma that the world is making people faster than new food supplies. China’s middle class is expected to rise by 300 million over the next five years, and the link between sugar consumption and standards of living is one of the most unassailable correlations out there in the commodities world. It’s also an indirect play on fresh water. Party away, but with your Blackberry in hand, and always stay close to the exit.

Fiat paper currencies are still running a frenzied race to the bottom. Politicians of both parties see the only way to win elections is to inflate. Reserves everywhere are playing out, and top producer Barrick Gold (ABX) isn’t opening a new mine at 15,000 feet in the Andes because it likes the fresh air. The output of gold has fallen by 12% annually for the past decade, compared to a doubling of production costs to $500/ounce. Almost all short term money market alternatives globally are yielding close to zero, meaning that the opportunity cost of owning the gold is nil. No pause to catch its breath until we hit $1,300. (GLD), (ABX), (UGL), (RGLD), (AEM), (GBG).

Has the outcome of Japanese elections signaled the end of the great bull markets in the yen and the JGB?

“Dr. Copper”, the only commodity with a PhD in economics, is predicting a decent economic recovery. While demand for American home construction remains in the basement, demand from China is surging, whose own construction industry remains on a tear. Global production has fallen 12% during the first half of this year. The new “monetization” of the red metal. Stashing copper bars in warehouses around the country, expecting the red metal to hit $6/pound within the next three years. (JJC), (DBB), (ECH), (FCX).

The rare earths plays have exploded into my best trades of the year. The smart money is pouring into the more valuable heavy rare earths. Are we reacinh a peak, or are we just getting started? (AVARF), (LYSCF), (GWMGF), (MCP).

Expect a dramatic roll back of the leftward policies the country has adopted over the last two years, and a sudden revival of the industries that have suffered as a result. Big oil, defense, health care, coal, nuclear energy, and for profit education companies are all big winners. And alternative energy too.

It’s all over but the crying. Online betting site Intrade is giving the Republicans a 70.9% change of taking the house in November, and 47.5% odds that they grab 50 seats or more. Harry Reid’s job is safe, and Carly Fiorina can forget it in California. Get used to Obama. He’s in for two terms. Until November 2, it is the only game in town.

Stocks are headed for a big multiple compression. Go long the beneficiaries of the relentless running of the printing presses in Washington. Once the spike in interest rates starts, it will be “a big, big bear market,” that could go on for decades. An exclusive interview with the legendary hedge fund manager, Bill Fleckenstein, on Hedge Fund Radio. (GLD), (NEM), (AEM), (GG), (TBT), (TMV), (VZ), (AAPL), (FXC), (CYB), (CU).

South Africa is popping up on the radars of several big hedge funds as one of a handful of frontier emerging markets ready to make the move to prime time. Direct investment has been pouring into the banking sector in South Africa in recent years, possibly presaging a major long term bull market. Prices are so low and earnings leverage so great that any dire political risks you can come up with have got to already be priced in. Has Armageddon been avoided, or only just postponed? (EZW), (AFK), (GAF).

The global supply of food is going from bad to worse. The torrential rains in Pakistan have been a game changer. There is a ton of cash sitting on the sidelines because so many investors are afraid of an autumn stock market crash, and are loathe to buy the top of the greatest bond bubble in history.