madhedgefundtrader's blog

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Lo, the Naked Hedge Fund





The July 21 deadline for the hedge funds to register required by the one year anniversary of the Dodd-Frank bill is fast approaching, and the industry is roiling with turmoil. The net result for the rest of us could be shrinking market liquidity and falling asset prices as hundreds of funds shut down or move overseas rather than meet the new, onerous disclosure requirements and the vastly increased legal liabilities they imply.

 
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Join the Mad Hedge Fund Trader for Lunch in Paris on April 8.





Bring your black berets, Breton shirts, and packs of Gitanes and Gauloises. Enough charts, tables, graphs, and statistics will be tossed at you to keep your ears ringing for a week. I’ll be looking for my front teeth, which I lost in a Left Bank riot in 1968.

 
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Vicious Girl Scout Conspiracy Threatens to Stoke “Stealth” Inflation





An evil plan to raise the prices of Thin Mints while no one is looking. If you can’t trust the Girl Scouts, who can you trust? In this deflationary environment, companies are loathe to raise prices. Food companies are especially hard hit, with many commodities like wheat, corn, sugar, soybeans, and coffee up 50%-300% in a year. Any attempt to pass these costs on to consumers is punished severely. Who will betray me next? The US government? The Department of the Treasury? The Federal Reserve?

 
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Next Stop $50 for Silver





The “Hunt Brother High” is within reach. The total demand for silver today is the same as it was in 1980, when their corning drove it to $50/ounce.
Investment demand is overwhelming industrial demand by a large margin. Should I let target creep take hold and raise my long term forecast to $100? That might be really insane! (SLV), (AGQ), (CDE), (SLW).

 
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China’s BYD Promises to Take Over the US Car Market.





Finding the Holy Grail of cheap lithium batteries. BYD’s E6 promises a 200 mile range for $40,000.The globally integrated, low cost business model beats all. Making competitors obsolete before they even enter the market. Building a “stealth” US dealer network. What will happen to my Nissan Leaf? Is there a ten bagger here in the stock? (BYDDF).

 
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The Bear Market in Treasury Bonds Takes a Breather





The “RISK OFF” trade could deliver a huge flight to safety for Treasury bonds. Is shorting short dated bond puts the best play?

 
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Come Meet the Mad Hedge Fund Trader for Lunch in New York on Thursday, March 31!





Come for a knockdown, drag out debate about the future of the global financial markets. More meat than a Carnegie deli pastrami. Floor traders please leave the brass knuckles at work. Commodities trades are required to wear shoes. Will the gold traders please leave your “wife beaters” at home.

 
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Catching Up With Technical Analyst to the Stars, Charles Nenner





If you have not made your year by now you are dead meat. Many of 2011’s big moves have occurred, and there aren’t going to be many fireworks for the rest of the year. Many asset classes are about to settle down into boring, predictable trading ranges. Unless you want to short the Euro. Stocks, gold, and silver are topping. (FX), (SPX), (GLD), (SLV), (TLT)

 
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Why Oil Has Peaked





The real price of crude oil really topped out at $120/barrel last week. Anyone in the oil industry will tell you that, considering only the true supply and demand for oil, the price should be about $70/barrel. All of the $23, or 27% increase in the price of oil in the last four weeks has been about fear. We are going to see $90/barrel before we see $150. Saudi Arabia is not Tunisia, Algeria, Egypt, or Libya. The Saudi’s had a lot more money to spread around to keep everyone loyal. This is why Al Qaida has made absolutely no inroads there for the past 10 years.

 
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Japan Update: It’s Much Worse than it Looks





Japan is back in recession. The incoming tide just brought in 2,000 bodies. Most major companies, including Toyota, Nissan, Honda, and Sony have shut down all domestic production. Tokyo’s subway system is closed, stranding 25 million residents there. Electric power shortages are a huge problem. Half the country’s nuclear generating capacity is now down. 20,000 expatriates waiting at Tokyo’s Narita airport as foreign companies evacuate staff to avoid a nuclear meltdown. $187 billion worth of credit intervention to “save Japan.”

 
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Why You Should Dump Everything in Japan





All corporate earnings forecasts have just been rendered meaningless. We could be putting in a 50 year double top on the yen here. Taking a bite out of global economic growth. Flipping from a +2% GDP growth rate to -3% in two minutes. International trade takes a major hit. The looming electronics parts shortage. The death toll could go to six figures. Don’t rush out and short Japanese insurance companies. (FXY), (YCS), (EWJ).

 
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Oil’s Big Push on Corn





The burgeoning demand for energy has spilled over to the corn market, where demand for feedstock by ethanol refiners is going from strength to strength. Nearly 40% of the country’s corn crop is being diverted to ethanol production. Expect the volatility of food prices generally to increase. (ADM).

 
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The “New Normal” Calls for a Lower Market Multiple Range.





The selloff we saw this week is consistent with my long term view that we are permanently downshifting from a 3.9% to a 2%-2.5% growth rate, and the lower multiples this deserves. Given our flaccid growth prospects going forward, I think the new range will be 10-16. It does not make today’s 15 multiple look like such a bargain.

 
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The Sword Hanging Over the Housing Market





Some 97% of the financing for the housing market is about to disappear. If Fannie Mae and Freddie Mac aren’t recapitalized soon, the home loan market will be privatized. One bubble too far. A free, unsubsidized market for home loans will be a much more expensive market. The grim outlook for home prices. That is when we find out how much freedom really costs.

 
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Why Warren Buffett Hates Gold





Who needs the barbarous relic? Not the Oracle of Omaha. But his anti-hard asset strategy only works if you are Warren Buffett.

 
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