Hedge Fund Manager's Notebook: The McCain Stock Effect

| About: Orbital ATK, (OA)

1) The momentum traders have definitively bailed from the crude/commodities trade, taking the fluff out of the market and equity valuations in the area down so much that even value players are starting to have a look see. Crude is not dead, it is just resting, and these names will fly again. My five year scenario for crude is that we go to the $80’s then $150, then below $20. Hold on to your hat!

2) July CPI came in at a red hot +0.8%, or 5.6% YOY. With wage growth at zero this means that the US standard of living is declining at a 5.8% annual rate this year. Thank you president Bush! Well done! This is what John McCain has to sell this year. Tough.

3) With the Obama boom now fading, McCain is rising in the polls. So Alliant Technology (ATK), one the largest suppliers of ammunition to the army, has jumped 17% to $112 in the past month. McCain has promised that we will stay in Iraq 100 years if necessary. I hope he doesn’t draft 56 year olds. Ten hut!

4) Germany and France posted negative GDP growth in Q2 when a weak dollar allowed the US to skirt an actual recession. I have been expecting this weakness for months which has been a major factor behind the current collapse of the euro, which hit a new low today of $1.4750. Real estate in Europe is in free fall.

5) Weekly natural gas inventories rose by 50 billion cubic feet, triggering a rally off of an $8.05 bottom. Gas, down from $13.50 in June, may have put in a bottom for the time being.

6) Erik Prince, CEO of the San Diego based private mercenary firm Blackwater Worldwide, says that he is billing the US government $550/ day for the 1,000 men it has in Iraq and the 500 men in Afghanistan. He says that Blackwater is expanding its training and air support operations and cutting back on politically sensitive “security” services because of the PR problems it creates. Prince complains that his company is “misunderstood”.

7) 50%-75% of all trading on the NYSE is now driven by mathematical algorithms. This along with the ending of the uptick rule is the cause of this year’s vastly increased market volatility.

8) If you are in a masochistic mood today go to Huffington Post and watch the video of Hungarian weightlifter Jands Baranyai painfully detach his forearm attempting to lift twice his own weight. His elbow rotates 180 degrees! Ouch and double ouch!

Full disclosure: no long or short positions in any stocks mentioned.