madhedgefundtrader's blog

The next play in this soap opera will see “uncertainty” emigrate from the US to Europe, sending the dollar off to the races and the Euro in for rehab. Lindsay Lohan, eat your heart out. (FXE), (EUO).

The currency with the world’s worst fundamentals is finally making its move. (FXY), (YCS).

At $19.20 a share, Cisco offers a PE multiple of 10 times, versus a market average of 15, the prospect of a dividend next year, and at 12%-17%, one of the most consistent long term growth outlooks of anyone. Did I mention that they get a majority of their sales from overseas, where growth rates are posting white hot double digit rates? Getting in on growth rates are posting white hot double digit rates on the cheap. (CSCO).

The seven time winner of the International Trading Championship gives his long term technical view. If the market reverts to the mean and makes up for the recent lost decade, then we should earn 22% a year over the next decade. Chuck thinks we have a lot of catching up to do.

The Federal Reserve has been manipulating the economy for the last 20 years through the “wealth effect.” When the wealth effect gets given back, plus interest, the markets crash. The Fed is now using quantitative easing to trick us into buying one overpriced asset, stocks, because the alternative, bonds, is even more overpriced. Long term US trend growth is only 2% a year. We’re going to have another crash. The recent moves in American stocks have been purely speculative. While the S&P 500 went up 20%, the junky part went up 120%. Cash is the only hiding place.

Skip General Motors, which is getting over inflated through a combination of media and government hype. Today Toyota, the world’s largest car maker, has been slammed by the perfect storm. Toyota has become the BP of the auto industry. Since the company is Japan’s largest exporter, it would benefit greatly from any weakness in the yen. Buy when there is blood in the streets. (TM), (FXY).

“Uncertainty” is emigrating from the US to Europe, sending the dollar off to the races and the Euro in for rehab. Lindsay Lohan, eat your heart out. A reemergence of the “PIIGS” disease, concerns about the deteriorating quality of the lesser sovereign credits in Europe, is now unfolding as the triggering event.

Could it be as simple as buy the rumor and sell the news? This sell off will end up as a whimper, not a bang. But the “Big One” for the markets is coming, and could unfold as early as the next quarter. Please tighten up you stops and your risk control accordingly.

Karl Denninger of Market Ticker thinks there is a secondary banking crisis next year that will trigger a cascading collapse in the stock market, and another government bailout. TARP 3 anyone? Going back to an S&P 500 earnings of $105-$110 a share in the face of the soaring cost input factors is totally laughable. “Foreclosure Gate” will be much worse than expected. The 900 pound gorilla in the room is the second line problem, which is mostly concentrated in the top banks. We could reach 3,000 in the Dow and 300 in the S&P 500. An exclusive interview with Karl on Hedge Fund Radio.

The approval of a massive 2.8 megawatt plant in California is a game changer for the solar industry. Entering the big time. It’s all part of a rush to start alternative energy projects before Federal subsidies from Obama’s 2009 stimulus package expire at the end of this year. This one plant will provide about 15% of the total residential power in California. Will the Golden States become the first to free itself of hated foreign oil imports?

Visiting the world’s most overpriced asset. The recent action in the markets suggests that the big turn may finally be behind us. Why have bond prices been falling for the past month, despite an assumed promise by the Fed to provide unlimited amounts of liquidity? (TBT).

Countries used to destroy their neighbors by sending in invading armies of screaming warriors swinging great long swords. Today, you simply buy their currency. Foreign banks are using their balance sheets to speculate in the currency markets and boost profits. Adding fuel to the fire has been efforts by the People’s Bank of China to diversify out of the dollar as a reserve asset by pouring new cash flows into the yen. This explains why the central bank’s intervention efforts to slow the yen’s appreciation have been an abject failure. How this kabuki play will end. (FXY), (YCS).

A fundamental restructuring America’s conduct of its foreign policy through the implementation of a quadrennial review is in the works. The US is executing a two pronged military/diplomatic strategy of stepped up bombing, while enticing the Taliban to the negotiating table. Before the US helps Pakistan, it must help itself first, through the raising of domestic taxes. Pushing for a common negotiating forum with Europe to bring Iran to the table on the nuclear issue. The START treaty with Russia on nuclear weapons control may pass in the Senate during the lame duck session. The US supports China’s peaceful rise, but the picture is “complex.”

We are entering the slowest growth period in US history. Distressed state and local finances are pushing the public sector into 20 years of cost cutting that is sending education spending plummeting, leading to the great “dumbing down” of America. No productivity gains here. This is why I have been urging traders and investors to get their money the hell out of the US. They must be laughing in Beijing.

We are entering the slowest growth period in US history. Distressed state and local finances are pushing the public sector into 20 years of cost cutting that is sending education spending plummeting, leading to the great “dumbing down” of America. No productivity gains here. This is why I have been urging traders and investors to get their money the hell out of the US. They must be laughing in Beijing.