madhedgefundtrader's blog

Hedge funds poured into the currency down under, making it one of the world’s best performing assets this month. The bottom line is that interest rates there are high and rising, while ours are low and stagnant. A procession of central banks have been pulling the ripcord on the troubled euro and landing into currencies with vastly better fundamentals. A proposed 40% mining tax triggers a stunning change in government. Singing “Waltzing Matilda” in the shower. (FXA), (EWA).

$2,000 in tax increases will be needed per household to cover increased government social service spending by 2015. This figure then soars to a mind blowing $12,636 by 2050. We are now paying the piper for 30 years of tax cuts and spending increases. Sure, we won the Cold War, but we did it all on an American Express card, and have been rolling over the balance ever since. The winner of elections from now on is basically irrelevant, as our problems have grown to the point of insolvability.

BP has discovered the largest and most powerful well in history, and control of it may be outside existing technology. Less than 1% of the spilled oil is ending up on the beaches. Possibly 36 million barrels will end up in the sea, the same amount put there by German U-boats during WWII. The best historical analogy is not asbestos or tobacco, but Vioxx. Not for widows and orphans

Margin calls from losing positions have forced hedge funds to free up cash by covering shorts in natural gas. Real demand isn’t coming until we have vastly more pipelines, power plant conversions, and above all, storage, than we have now. Until then, the big production companies are going to race to out produce each other, praying they can use volume to offset price cuts, creating a huge weight on prices. (CHK), (DVN), (UNG).

When foreign labor costs reach half of those at home, manufacturers quit exporting jobs. Chinese wage growth at the current rate takes them up to half our minimum wage in only five years. Recent indications that the Chinese will allow the Yuan to float, and therefore go up, will only accelerate this trend. (FXI), (EWY), (VNM),

The best we can expect is an anemic H2 GDP growth rate of only 1.5%. The private sector has flipped from spending 4% of GDP to saving 7%, a massive deflationary swing. I’m sure Ben Bernanke is listening.

A visit to the worst commercial real estate disaster in human history. Why it is cheaper to spend a weekend in Sin City than it is to stay home.
An 80% occupancy rate, only because 20% of those rooms have been mothballed and taken off the market. Thanks for the great weekend, Kirk!

The daily spill estimate has been ratcheted up from 1,000 barrels a day to 35,000, and now 60,000. Fitch downgraded its debt a stunning six notches from AA to BBB. Obama’s oval office salvo was directly aimed at the firm. $20 billion has been forced into an escrow account to cover damages. And now lightning has struck their crude recovery ship! Is it possible that the capitulation sell off in BP stock is at hand? (BP), (RIG).

By going long corn, you effectively own a rising standard of living in the emerging markets, as well as challenging fresh water shortages, famine, and bad weather in grain producing countries. It also looks like the mindless diversion of one third of the US corn crop for fermentation into ethanol for fuel is not only going to continue for the foreseeable future, it will expand. Check out the new corn ETF. Sounds like a “buy” to me. (CORN).

How much do you want to buy at a 28 year market top? Last year, a staggering $375 billion poured into bond funds, a record, while $40 billion exited equity funds, despite a Dow that rose 23%.

A booming auto industry has lit a fire under that rarest of precious metals, rhodium. Is it time to buy gold’s rich uncle? (AAUKY.PK), (PAL), (SWC).

The currency is in free fall, and the continent is about to enter a new dark age, as enforced deleveraging brings economic collapse and widespread civil unrest. To me, this all means it’s time to start sifting through the wreckage, looking for potential buys in Europe. Suddenly, Poland is more than just a joke.

The technical analyst to the stars says tt is safe to buy the S&P 500 (SPY) this week for a summer rally because the big crash isn’t coming until the fall. You should use the current bout of weakness in the Australian dollar (FXA) to load the boat. Oh, and while you’re at it, short gold (GLD). The next swoosh down will be more violent and longer than anything we have seen so far. Emerging markets (EEM) to remain cool. A major long term bull market in corn, wheat, and soybeans launches after the summer.

All of BP’s efforts to date have really been “Hail Mary’s” doomed to failure. Bring in a small tactical nuclear weapon, or you can kiss BP goodbye.
It’s a lot easier than it sounds, and would probably work. It’s either that, or face the environmental equivalent of Chernobyl meets Katrina. (BP).

The consumer products giant’s $238 billion market capitalization now tops that of Microsoft. To see the company bring out the IPad and sell 2 million units during appalling economic conditions is nothing less than amazing. Forecasts for the global smart phone market are ratcheting up by the day. Sales of several of its products are going hyperbolic at the same time. Steve is sitting on a monster cash flow generator. Earnings could skyrocket from the current $12/share to $30 over the next two years. So who is the world’s worst Apple stock trader? (AAPL), (MSFT).