madhedgefundtrader's blog

Running our cars on moonshine is far more expensive than it looks. Cruising to Wal-Mart in our Hummers, while Africa and Asia starve. Corn grown for ethanol now occupies 10% of the total arable land in the US. The world’s largest producer, Brazil, is shut out of the US to keep our prices high. The birth of yet another entrenched lobby in Washington. Is Iowa really worth it?

Large cap multinational equities are the cheapest they have ever been. An exclusive interview with Barton Biggs of mega hedge fund Traxis Partners. A stronger than expected economy will take S&P 500 earnings to $90/share. Asia is the place to be. A mammoth bubble may be developing in China, but it is at least 3-5 years off. India has yet to experience its big growth spurt. Buy South Korea, Taiwan, Thailand, Turkey, and short Brazil. (OEF), (MSFT), (INTC), (CSCO), (ORCL), (FXI), (PIN), (EWY), (THD), (EWT), (EWH), (TUR), (PLND), (RSX), (EWZ), (USO).

It is time to start scaling into a major short in the yen. The Euro/Yen cross is pointing the way. The prospects of Japan raising rates are nil. The government’s pool of lenders is drying up. The savings rate is plummeting. The bill for the world’s worst demographic outlook is coming due. Macro investing at its finest. Look for ¥120 in a year. (YCS)

Something amazing is happening in the labor market. The aggregate payroll figures are meaningless. Many of the jobless are getting rehired very quickly. This is proof that the dying sectors of the US economy that are delivering the highest unemployment rates. US employment is really much better than it appears. Without the snow, the February number could have been as high as a positive 100,000. Alert: the markets don’t know this.

Not for a while. The bad news is that a truly economic, price competitive lithium battery is still some ways off. The problem with exploding batteries. The Department of Energy is pouring money into lithium research on an amazingly wide front. The car companies aren’t buying it, and are sticking with proven nickel metal hydride batteries. Unlike past battery car movements, this one is not going to end up crushed in a junkyard. (SQM), (ENS), (XIDE), (CHP), (ZBB).

How does an NFL linebacker develop computer algorithms that give a crucial edge in the market? “Large pipes” are your trading edge, and “clouds” do the heavy lifting. Like the NFL, you can’t defend against speed. Jon’s system catches big hedge funds, pension funds, and mutual funds shifting large positions. If China is serious about throttling back its economy, it will have a dampening effect on global markets. Volatility is going to die. An exclusive Hedge Fund Radio interview with OptionMonster’s Jon Najarian.

The outlook for the economy is bleak, at best. The stimulus package should have been at least $1.2 trillion. Any major spending cuts will produce “Hoover” outcomes. An extreme form of “trickle down economics" quickly reached a dead end. The banks’ accounting loopholes were so imaginative that not only were shareholders and regulators deceived, senior management was clueless as well. The winner of the Nobel Prize in economics reveals how “information asymmetry,” led to the financial crisis. The repeal of Glass-Steagle was a disaster. No wonder Main Street feels cheated.

The press has recently been flooded with exaggerated reports of widespread well poisonings and forest destruction. A blank check to render toothless any Cap & Trade legislation, block subsidies for natural gas, dilute environmental legislation, and promote the myth that the whole global warming thing is nothing more than a leftist hoax. The ghost of the Swift Boat Veterans for Truth returns to haunt. Thanks Dick Cheney! Tell it to the 23,000 Americans coal emissions will kill this year. (BTU), (RTP), (ACI).

Brace yourself. Nothing is going to happen. A portfolio manager’s worst nightmare, and a trader’s dream come true. Selling out of-the-money-strangles, last year’s suicide trade, could be this year’s steady earner. The VIX will continue to bleed to lower levels. Hiding out in the currency crosses. (SPX), (FCX), (VIX), (USO), (GLD), (TBT), (TBF)

The shrinking contango does not bode well for prices. US hedge funds are operating the world’s second largest navy. You could almost walk across the Caribbean without getting your ankles wet. Don’t buy any more oil at these prices than you can use in your salad dressing. The “monetary” demand for oil is on the wane. There is just a pig in the python in that has to be digested. (USO)

Add a real unemployment rate of 17% to the 25% who have negative home equity, and who is left to buy houses? Only those who are bribed. Graduating from the negative equity city the negative equity state. Net baby boomer demand for housing is shrinking by tens of millions of square feet per year.

Diamond prices have jumped 30% since March, but the business is being turned on its ear. Your local neighborhood jewelry store is about to get wiped out. A 5% annualized return, with benefits. Eating Blue Nile’s lunch. The stock plunges a nausea inducing 20% in one day. What’s up with those toothpaste tubes? A consumer spending play with a turbocharger, and the reverse.

The economic advisor to libertarian Ron Paul’s 2008 presidential campaign gives his views in an exclusive Hedge Fund Radio interview. The Republicans of the last administration weren’t “real” Republicans. The US government is a “cancer on the economy.” The Fed “has managed the economy into the ground.” Interest rates will skyrocket, stock and bond markets will crash, and more financial institutions will fail. Civil unrest is coming. Gold, commodities, and emerging market stocks will be the only place to hide out. You won’t be able to buy “a stick of gum” with a dollar.

We’re about to find out who has been swimming without a suit. TALF is expiring, sucking another $1.5 trillion out of the system. One of the steepest yield curves in history is about to become a lot steeper. The face of Half Dome comes to mind. A short in 30 year Treasury bonds will be THE great trade of 2010. Failed Treasury auction here we come.

Meeting the tip of the spear. The cycle of warfare is now driven by Moore’s Law (XLK), (CSCO), (GOOG). We can only afford to spend on winning current conflicts, not potential future wars. The war on terrorism will continue for at least 4-8 more years. Water (PHO), (CGW) is going to become a big defense issue. We may have to lose a few institutions in a cyber attack. Russia will never be able to field a million man army again. “We’re not going to be able to kill our way or buy our way to success in Afghanistan.”