madhedgefundtrader's blog

The Department of Education says the loan repayment rate at some for profit schools is as low as 25%, and that it would disqualify these schools for future student loans. That amounts to the taking away the punch bowel from a highly leveraged, overpriced industry, a hedge fund manager’s dream come true. Advising students to lie on their loan applications does not turn out to have been such a great business plan. (APOL), (DV), (CPLA), (COCO)

It sits on a staggering $30 billion of cash worth $95 a share, and annually generates another $27 in free cash flow. While it may be a one trick pony, with 97% of its revenues coming from search, that’s not a problem if the equine’s name is Seabiscuit, with a 70% global market share. A turnaround at YouTube. (GOOG), (BIDU).

What is the monopoly for providing cell phone services in the China worth? More than 5 million new subscribers a month. A 3.5% dividend yield means you should put this stock on your speed dial. (CHL).

Rising oil prices (USO) are going to be a major investment theme from here on. Positioning for $150/barrel oil. Higher crude realizations, a new LNG project coming online in Qatar, and sharply recovering refining margins all contributed to sharp growth at ExxonMobile. Investing in the world’s most conservative company. (XOM).

Taking physical delivery turns the market upside down. Speculation is rife about secret hedges, under the table contracts, or other back room deals. Banned in the US, but legal in London. A newfound penchant for chocolate by the rising Chinese middle class. Get involved, but you might consider taking a long nap first. (NIB).

The hoopla over GM’s impending, politically timed IPO obscures fundamental weaknesses that have not going away. Its core customer base is dying off as fast as the reborn company can build new cars. A company with a demographic headache like no other. Driving to Beijing for a tune up?

Where The Economist “Big Mac” Index Finds Currency Value.

Is the real yield for the Japanese yen actually to 4.1%? The yen strength will eventually end, because while gold cannot be created out of thin air, currency can. Expect a massive quantitative easing that sends the printing presses into triple overtime.

It’s just a matter of time before global buying of the grains spills over into the sugar market. Should you be buying the world’s worst performing asset? New shortages are looming on the horizon. The US Department of Agriculture claims our stockpiles are at a 40 year nadir. China is developing a sweet tooth. (SGG), (CZZ).

The tide is suddenly heading out to sea for aspiring hedge fund traders. A torrent of talent pouring into the marketplace fleeing the onerous restrictions of FinReg. Hedge funds, have crimped new hiring, their own modest first half returns keeping new investors at bay. Could we be setting up for a bonus draught like the one we saw in 2008?

Wheat prices have doubled in six weeks. Domestic grain traders, seeing nothing but rows of corn, wheat, and soybeans at home as far as they eye could see, were caught totally flat footed. This crop disaster was totally foreign in its origin. Trouble with the canola crop in Canada rippled from Australia, Western China, the Ukraine, and then to Russia, big time. Time to take profits. As any farmer will tell you, pigs get slaughtered.

A decade from now, it will not be stock investors complaining about a lost decade, but owners of bonds. Is the final blow off top in the great 30 bull market in bonds at hand? PIMCO’s Mohamed E-Erian says that there is a 25% chance of real deflation hitting the US. The higher bonds go, the more imaginative the explanations become as to why it should continue. (TBT), (TMV)

The BP Gulf disaster is turning the fundamental assumptions of the oil industry upside down. Major oil companies with deep pockets at risk are rushing to offload their existing offshore leases and partnerships in producing wells to avoid BP’s potential $30 billion hickey. Liability caps are nothing more than wishful thinking. The birth of a new distressed junk market. New life for the once moribund natural gas market. Look for $100/barrel by year end.

The US is suffering from permanent unemployment at the current levels, much like Germany saw in the eighties and nineties. Just emerging from the near death experience of the century, companies will only hire a few temps which they can jettison with a mouse click. The drag from the states and municipalities is a long term structural issue that has only made a few halting baby steps towards solution. Managers don’t want to hire in front of a diminished long term GDP growth rate of 2%. There is nothing either political party can do about this but blame each other. A new interstate system, anyone?

Friday was the 65th anniversary of the Hiroshima atomic bomb. A visit to the Atomic Bomb Victims Hospital. Futilely treating gamma rays and beta particles with mercurochrome and traditional Japanese folk remedies. No one could live there for 20,000 years. Every type of plant strangely flourished after the bomb, but men and women were left sterile. Where has the bomb taken us today?