madhedgefundtrader's blog

While globalization has generated immense wealth over the last 30 years, it has accrued only to those who were in position to take advantage of it. Those would be multinationals, technology firms, and emerging nations. If you are not one of those, or a shareholder in them, then you have been basically screwed by globalization. Champaign with former Secretary of Labor, Robert Reich.

Engage in “constructive paranoia” and structure your portfolio to take advantage of the changes sweeping through the economy, rather than fall victim to them. A bumpy journey to a “new normal”. Developed countries will see sluggish economic growth, high structural unemployment, increased regulation, and constant pressure for private sector deleveraging.

Cracks are not spreading on the façade, real estate sales are not falling, and that the economic engine is not starting to sputter. China has literally been building a Rome a day. But 160 million are expected to move from the hinterlands to urban areas, enough to soak up this excess. The country’s real challenge arises when its demographic pyramid starts to invert in about five years. When that happened in Japan, a 21 year bear market followed. (FXI), (CYB).

The stock market peaked last February, not on April 29, as the indexes are suggesting. The stock prices of the best run companies in the most profitable industries are rolling over like the Bismarck. The best case is that we are nearly three weeks into a 10% correction that will take us to the 200 day moving average for the (SPX) at 1,234. (AAPL), (GOOG), (GS), (FCX).

Take the fear premium out of crude and suddenly it is worth $50 a barrel. Saudi Arabia is ramping up from 10 to 15 million barrels a day of production. What happens if Libya’s Muammar Khadafy suddenly chokes to death on a falafel? (USO), (DUG).

They call the red metal “Dr. Copper” because of its uncanny ability to forecast the future direction of the global economy. Well, this year, he has been right again. The sudden sell off in crude has also created some spill over selling in other hard assets. That the long term case for copper is still compelling. (CU), (FCX).

If you have to name one beneficiary of QE2, the collapse of the dollar, and a seemingly never ending “RISK ON” trade, it has got to be the euro. What happens when QE2 ends, and the movie runs in reverse? (FXE), (UUP), (EUO).

Is the disaster creating a buying opportunity? China has far and away the world’s most ambitious nuclear program, with 100 plants on order over the next decade. Any cut back in the nuclear program would have to be met with stepped supplies from other sources, which are unavailable. The place to go when “RISK OFF” is over? (NLR), (CCJ).

The head of America’s largest newspaper is terrified of blogs. The battle of bytes versus trees, and the bytes are winning. Running a picture of the dead Lady Diana, or not?

Come join me for lunch for the Mad Hedge Fund Trader’s Global Strategy Update, which I will be conducting in San Francisco, California on May 20, 2011. A three course lunch will be followed by a 30 minute PowerPoint presentation and a 45 minute question and answer period.

Stock markets on crack are about to join Lindsey Lohan and Charlie Sheen in rehab. We are witnessing the end of the third great bubble in debt, the greatest accumulation of IOU’s in history. The Federal Reserve is now manipulating all markets, and the exercise is certain to end in tears. The only way out from this will be to suffer an economic and financial crisis worse than we have seen to date. Dow 3,500, here we come. Looking for oil at $15 a barrel. Gold craters to $250 and silver to $4. A 2% yield on ten year Treasuries anyone?

The music has stopped playing, so it’s time to sit down.

The global “RISK OFF” trade takes its toll. But for the barbarous relic, this is only a breather. The average Chinese gold holding is $36 per person compared to $1,197 in the US. Expect the former to rise a lot. The trade is moving to the Middle Kingdom. The US is still on top with reserves, but ETF’s are catching up fast. That is unless the gold bars in Fort Knox are actually made of lead with gold paint. Still looking for $2,300.

As destructive as the Japanese tsunami has been, it may have left some investment pearls in its wake. It has suddenly made available some of the country’s best of breed, world beating companies available at throw away prices. But this is going to be an investment for longer term money, not a trade, as some patients may be required for a payday.

Want a cheap undated put on oil? A Darwinian thinning out has taken place over the last 30 years, while management has learned to make this worst nightmare of an industry efficient. The top four airlines now control 75% of the US market. The industry has fewer seats than in 1982; while inflation adjusted fares are down 40%. When was the last time you saw an empty seat on a plane? (AA), (LUV).