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  • Apple Already Puts Its Cash To Work [View article]
    Apple has become a monster cash flow generator. Apple now has the envious problem in that sales of several of its products are going hyperbolic at the same time.
    Apple announced net profits of $13.06 billion, or $13.87 per share, up 11% from the previous year. If the company just maintains that rate for the rest of the year, it will generate $55.48 in earnings, which at the current 11.5 multiple should take the stock up to $638, up 40%. If Apple makes it up to a market multiple, the stock should rise to $721, a gain from here of 58%.

    If the multiple expands to its pre-crash average of 35 X, that would take the stock to a positively nose bleeding $1,941, giving you a 424% return from current levels. Then the company would be worth $2.8 trillion and rank 5th in the world in GDP, more than France, and just behind Germany. Wow!
    It all reinforces my view that Apple shares will reach my long term target of $1,000 sooner than anyone thinks. Long term readers are well aware that I have been making this call for the past two years back when it was trading at a lowly $240. More recent subscribers will also recall that I predicted that Apple would be the top performing technology stock in my 2012 Annual Asset Class Review.
    I'm not saying that you should rush out and load up on stock today. But it might be worth taking a stake on the next wave of fear that strikes the market.

    - The Mad Hedge Fund Trader -
    Feb 2, 2012. 09:40 PM | 1 Like Like |Link to Comment
  • Apple's CEO Discusses Q1 2012 Results - Earnings Call Transcript [View article]
    Apple has become a monster cash flow generator. Apple now has the envious problem in that sales of several of its products are going hyperbolic at the same time.
    Apple announced net profits of $13.06 billion, or $13.87 per share, up 11% from the previous year. If the company just maintains that rate for the rest of the year, it will generate $55.48 in earnings, which at the current 11.5 multiple should take the stock up to $638, up 40%. If Apple makes it up to a market multiple, the stock should rise to $721, a gain from here of 58%.

    If the multiple expands to its pre-crash average of 35 X, that would take the stock to a positively nose bleeding $1,941, giving you a 424% return from current levels. Then the company would be worth $2.8 trillion and rank 5th in the world in GDP, more than France, and just behind Germany. Wow!
    It all reinforces my view that Apple shares will reach my long term target of $1,000 sooner than anyone thinks. Long term readers are well aware that I have been making this call for the past two years back when it was trading at a lowly $240. More recent subscribers will also recall that I predicted that Apple would be the top performing technology stock in my 2012 Annual Asset Class Review.
    I'm not saying that you should rush out and load up on stock today. But it might be worth taking a stake on the next wave of fear that strikes the market.

    The Mad Hedge Fund Trader
    Feb 2, 2012. 09:40 PM | Likes Like |Link to Comment
  • Rising Volatility And Falling Currencies Is Likely To Turn Stocks Lower [View instapost]
    Last week, the yen was driven back to the very top of the range with a modest “RISK OFF” trade in the global financial markets, that has so far only lasted three days. It was enough to take the (FXY) from $125.80 to $129.10, a big move for such a normally quiescent currency. So I am going to buy the Currency Shares Japanese Yen Trust ETF (FXY) March 2012 $129 puts at $1.60 or best.

    Because the yen has been stuck in such a narrow range for so long, the options are fantastically cheap. You can buy the March Yen puts with an implied volatility of only 8%, compared to 50% for the (UNG) puts, and a nose bleeding 80% for the (VIX) calls. Break out of this range, and these implieds, and put prices, go through the roof.

    If the yen moves back to the bottom end of this range, which appears on the charts etched in stone, then you should get a triple on the puts. If the rapid deterioration of Japan’s horrific fundamentals starts to accelerate, then you could get a downside breakout on the (FXE) and far larger profits that many hedge fund managers have been calling for.

    Those unable to execute trades in options can buy the Pro Shares Ultra Short Yen ETF (YCS), a double leveraged bet that the yen goes down. -

    The Mad Hedge Fund Trader
    Feb 1, 2012. 06:09 PM | Likes Like |Link to Comment
  • More Than One Way To Short The Euro [View article]
    Last week, the yen was driven back to the very top of the range with a modest “RISK OFF” trade in the global financial markets, that has so far only lasted three days. It was enough to take the (FXY) from $125.80 to $129.10, a big move for such a normally quiescent currency. So I am going to buy the Currency Shares Japanese Yen Trust ETF (FXY) March 2012 $129 puts at $1.60 or best.

    Because the yen has been stuck in such a narrow range for so long, the options are fantastically cheap. You can buy the March Yen puts with an implied volatility of only 8%, compared to 50% for the (UNG) puts, and a nose bleeding 80% for the (VIX) calls. Break out of this range, and these implieds, and put prices, go through the roof.

    If the yen moves back to the bottom end of this range, which appears on the charts etched in stone, then you should get a triple on the puts. If the rapid deterioration of Japan’s horrific fundamentals starts to accelerate, then you could get a downside breakout on the (FXE) and far larger profits that many hedge fund managers have been calling for.

    Those unable to execute trades in options can buy the Pro Shares Ultra Short Yen ETF (YCS), a double leveraged bet that the yen goes down.

    - The Mad Hedge Fund Trader -
    Feb 1, 2012. 06:08 PM | Likes Like |Link to Comment
  • The Japanese Yen May Finally Be Peaking [View article]
    Last week, the yen was driven back to the very top of the range with a modest “RISK OFF” trade in the global financial markets, that has so far only lasted three days. It was enough to take the (FXY) from $125.80 to $129.10, a big move for such a normally quiescent currency. So I am going to buy the Currency Shares Japanese Yen Trust ETF (FXY) March 2012 $129 puts at $1.60 or best.

    Because the yen has been stuck in such a narrow range for so long, the options are fantastically cheap. You can buy the March Yen puts with an implied volatility of only 8%, compared to 50% for the (UNG) puts, and a nose bleeding 80% for the (VIX) calls. Break out of this range, and these implieds, and put prices, go through the roof.

    If the yen moves back to the bottom end of this range, which appears on the charts etched in stone, then you should get a triple on the puts. If the rapid deterioration of Japan’s horrific fundamentals starts to accelerate, then you could get a downside breakout on the (FXE) and far larger profits that many hedge fund managers have been calling for.

    Those unable to execute trades in options can buy the Pro Shares Ultra Short Yen ETF (YCS), a double leveraged bet that the yen goes down.

    The Mad Hedge Fund Trader
    Feb 1, 2012. 06:07 PM | Likes Like |Link to Comment
  • Does The Chesapeake Energy Shut-In And Curtailment Matter? [View article]
    Natural gas finally got some good news last week. First, major producer, Chesapeake Energy (CHK) announced that it was cutting its natural gas production by 50%, taking some immediate pressure off the market. Sure, (CHK) is just one company, but others may follow suit.

    Second, at the urging of my friend, Boone Pickens, Present Obama announced funding of some natural gas corridors in his State of the Union address. These are chains of natural gas stations placed every 100 miles stretching from east to west and north to south that would allow heavy trucks on transcontinental routes to refuel. This would provide the extra incentive for these 18 wheelers to convert from diesel fuel to CH4 at a nominal cost and put a major dent in our oil imports.

    The news was enough to trigger a massive short covering rally in this most unloved of molecules. The spot market soared 25%, from $2.25 to $2.82 per MBTU’s, while the ETF (UNG) leapt from $5 to $6.

    I am going to call the bluff of the market here and buy the United States Natural Gas Fund April, 2012 $6 puts at $0.65 or best. That way I can take advantage of the huge contango that exists between the spot and forward markets for natural gas futures contracts. To avoid actually drilling its own wells, the (UNG) buys forward contracts at huge premiums and holds them until they expire at spot. They then roll the cash forward into new contracts and repeat the process. It is one of the best wealth destruction machines I have ever seen and explains why (UNG) has, by far, outperformed natural gas on the downside. It is a great thing to be short.

    - The Mad Hedge Fund Trader -
    Feb 1, 2012. 12:05 AM | Likes Like |Link to Comment
  • Chesapeake Energy Is More Undervalued Than Enterprise, Kinder Morgan [View article]
    Natural gas finally got some good news last week. First, major producer, Chesapeake Energy (CHK) announced that it was cutting its natural gas production by 50%, taking some immediate pressure off the market. Sure, (CHK) is just one company, but others may follow suit.

    Second, at the urging of my friend, Boone Pickens, Present Obama announced funding of some natural gas corridors in his State of the Union address. These are chains of natural gas stations placed every 100 miles stretching from east to west and north to south that would allow heavy trucks on transcontinental routes to refuel. This would provide the extra incentive for these 18 wheelers to convert from diesel fuel to CH4 at a nominal cost and put a major dent in our oil imports.

    The news was enough to trigger a massive short covering rally in this most unloved of molecules. The spot market soared 25%, from $2.25 to $2.82 per MBTU’s, while the ETF (UNG) leapt from $5 to $6.

    I am going to call the bluff of the market here and buy the United States Natural Gas Fund April, 2012 $6 puts at $0.65 or best. That way I can take advantage of the huge contango that exists between the spot and forward markets for natural gas futures contracts. To avoid actually drilling its own wells, the (UNG) buys forward contracts at huge premiums and holds them until they expire at spot. They then roll the cash forward into new contracts and repeat the process. It is one of the best wealth destruction machines I have ever seen and explains why (UNG) has, by far, outperformed natural gas on the downside. It is a great thing to be short. _

    The Mad Hedge Fund Trader
    Feb 1, 2012. 12:04 AM | Likes Like |Link to Comment
  • Will Chesapeake Energy's Actions To Support Natural Gas Prices Help? [View article]
    Natural gas finally got some good news last week. First, major producer, Chesapeake Energy (CHK) announced that it was cutting its natural gas production by 50%, taking some immediate pressure off the market. Sure, (CHK) is just one company, but others may follow suit.

    Second, at the urging of my friend, Boone Pickens, Present Obama announced funding of some natural gas corridors in his State of the Union address. These are chains of natural gas stations placed every 100 miles stretching from east to west and north to south that would allow heavy trucks on transcontinental routes to refuel. This would provide the extra incentive for these 18 wheelers to convert from diesel fuel to CH4 at a nominal cost and put a major dent in our oil imports.

    The news was enough to trigger a massive short covering rally in this most unloved of molecules. The spot market soared 25%, from $2.25 to $2.82 per MBTU’s, while the ETF (UNG) leapt from $5 to $6.

    I am going to call the bluff of the market here and buy the United States Natural Gas Fund April, 2012 $6 puts at $0.65 or best. That way I can take advantage of the huge contango that exists between the spot and forward markets for natural gas futures contracts. To avoid actually drilling its own wells, the (UNG) buys forward contracts at huge premiums and holds them until they expire at spot. They then roll the cash forward into new contracts and repeat the process. It is one of the best wealth destruction machines I have ever seen and explains why (UNG) has, by far, outperformed natural gas on the downside. It is a great thing to be short.

    The Mad Hedge Fund Trader
    Feb 1, 2012. 12:04 AM | Likes Like |Link to Comment
  • 3 Reasons To Avoid The Facebook IPO [View article]
    The street is chattering today over the prospect of an enormous payday with the imminent IPO for the social media company, Facebook. Price talk is valuing the company as high as $100 billion, making it the largest such floatation in history. Could the mega deal spell the end of the current bull market?

    Look at it this way. That is $100 billion that gets sucked out of the market. It is $100 billion that gets diverted away from existing equity allocations. Many investors will need to sell existing positions in other companies to pay for their new Facebook shares, especially in the technology sector.

    Can the market afford to lose $100 billion in buying power in its current fragile condition? I think not. Take a look at the chart below which has the (SPY) making a near parabolic move since the beginning of the year. At the very least, we need to pull back to just above $126, which takes us down to 1,256 on the S&P 500, smack dab on the 200 day moving average. If you don’t believe me, then take a look at the chart for the financials sector ETF (XLF), which has led the market this year and is clearly rolling over.

    I’ll tell you who the big winner in a Facebook IPOP will be. The San Francisco Bay area. $100 billion is a ton of money to pour into a single urban area. The issue is expected to create several billionaires and as many as 3,000 new millionaires in my neighborhood.

    The last time that happened was when Google (GOOG) went public, creating a wealth effect that never went away, taking the waiting list for a new Ferrari or Tesla out two years. Better buy real estate near Facebook’s Menlo Park headquarters, such as in Atherton, Palo Alto, and Mountain View. The bidding wars are about to begin!_

    The Mad Hedge Fund Trader
    Jan 30, 2012. 11:57 PM | Likes Like |Link to Comment
  • Facebook's IPO: Squeezing Every Last Dime [View article]
    The street is chattering today over the prospect of an enormous payday with the imminent IPO for the social media company, Facebook. Price talk is valuing the company as high as $100 billion, making it the largest such floatation in history. Could the mega deal spell the end of the current bull market?

    Look at it this way. That is $100 billion that gets sucked out of the market. It is $100 billion that gets diverted away from existing equity allocations. Many investors will need to sell existing positions in other companies to pay for their new Facebook shares, especially in the technology sector.

    Can the market afford to lose $100 billion in buying power in its current fragile condition? I think not. Take a look at the chart below which has the (SPY) making a near parabolic move since the beginning of the year. At the very least, we need to pull back to just above $126, which takes us down to 1,256 on the S&P 500, smack dab on the 200 day moving average. If you don’t believe me, then take a look at the chart for the financials sector ETF (XLF), which has led the market this year and is clearly rolling over.

    I’ll tell you who the big winner in a Facebook IPOP will be. The San Francisco Bay area. $100 billion is a ton of money to pour into a single urban area. The issue is expected to create several billionaires and as many as 3,000 new millionaires in my neighborhood.

    The last time that happened was when Google (GOOG) went public, creating a wealth effect that never went away, taking the waiting list for a new Ferrari or Tesla out two years. Better buy real estate near Facebook’s Menlo Park headquarters, such as in Atherton, Palo Alto, and Mountain View. The bidding wars are about to begin!

    The Mad Hedge Fund Trader
    _
    Jan 30, 2012. 11:57 PM | Likes Like |Link to Comment
  • 4 Reasons To Anticipate Facebook's IPO [View article]
    The street is chattering today over the prospect of an enormous payday with the imminent IPO for the social media company, Facebook. Price talk is valuing the company as high as $100 billion, making it the largest such floatation in history. Could the mega deal spell the end of the current bull market?

    Look at it this way. That is $100 billion that gets sucked out of the market. It is $100 billion that gets diverted away from existing equity allocations. Many investors will need to sell existing positions in other companies to pay for their new Facebook shares, especially in the technology sector.

    Can the market afford to lose $100 billion in buying power in its current fragile condition? I think not. Take a look at the chart below which has the (SPY) making a near parabolic move since the beginning of the year. At the very least, we need to pull back to just above $126, which takes us down to 1,256 on the S&P 500, smack dab on the 200 day moving average. If you don’t believe me, then take a look at the chart for the financials sector ETF (XLF), which has led the market this year and is clearly rolling over.

    I’ll tell you who the big winner in a Facebook IPOP will be. The San Francisco Bay area. $100 billion is a ton of money to pour into a single urban area. The issue is expected to create several billionaires and as many as 3,000 new millionaires in my neighborhood.

    The last time that happened was when Google (GOOG) went public, creating a wealth effect that never went away, taking the waiting list for a new Ferrari or Tesla out two years. Better buy real estate near Facebook’s Menlo Park headquarters, such as in Atherton, Palo Alto, and Mountain View. The bidding wars are about to begin!

    The Mad Hedge Fund Trader
    Jan 30, 2012. 11:57 PM | Likes Like |Link to Comment
  • Angela Merkel Correct Even Though Banking Collapse Coming [View article]
    I heard the magic words today from German chancellor Angela Merkel and French president Nicolas Sarkozy: “treaty changes”. That will be the gist of their joint proposal at the European summit this coming Friday to deal with the sovereign debt crisis.

    To me, this means that the two besieged leaders are finally biting the bullet and laying the groundwork for the sweeping changes needed to solve their formidable financial challenges.

    The plan will implement greater budget discipline with automatic sanctions for budget busters like Greece, who exceed the 3% of GDP deficit guidelines. Expect the European Financial Stability Council (EFSF) to move into action next year to help keep Greece in the monetary union.

    You can also expect the European Central Bank to launch some fireworks this week. Among them will be:

    1) ECB president Mario Draghi will cut interest rates by 25-50 basis points.

    2) The ECB will relax collateral rules for borrowing banks.

    3) It could also increase sovereign debt purchases of paper from the weaker countries, like Italy and Spain, from last week’s feeble $3.5 billion to as much as $20 billion a week.

    The bottom line here is to expect a lot of “feel good” news flashes in coming days, which could cause the Euro to edge back up to the top of its current trading range at $1.3550.

    But don’t hold your breath for any panaceas. The European treaty includes 27 members, with 17 employing the Euro as a common currency, and all have to agree to any changes. Substantial modifications will require national referendums. On top of that, Sarkozy is still blocking pan Eurobonds advocated by Merkel, which is the only supra national fund raising mechanism that can possibly work.

    The reality here is that Germany is imposing austerity and fiscal discipline on the rest of Europe, and non-Germans may not necessarily like it. So the next wave of optimism is likely to once again bear the bitter fruit of disappointment, taking the beleaguered European currency down to $1.29 in Q1, 2012.

    For those of you who have followed my advice to sell short the euro, there is an 800 pound gorilla in the room to deal with. The trading community is now short over 100,000 contracts in the futures market, an all-time high, matching the peak seen in the spring of last year, when the Euro just fell short of $1.60. The risk of a snap back rally going into the coming European love fest is high.

    I have noticed that in recent weeks, the market is allowing the nimble ever smaller profits from their quick in and out trades. This may be a function of the declining volatility going into the holidays and the year end. So those with itchy trigger fingers may want to take profits sooner than they usually might and celebrate Christmas early. The value of dry powder is rising.

    The Mad Hedge Fund Trader
    _
    Dec 19, 2011. 04:31 PM | Likes Like |Link to Comment
  • European Banks Lead Stocks Lower As Angela Merkel Works In Leaders Summit For The United Europe Of Germany [View instapost]
    I heard the magic words today from German chancellor Angela Merkel and French president Nicolas Sarkozy: “treaty changes”. That will be the gist of their joint proposal at the European summit this coming Friday to deal with the sovereign debt crisis.

    To me, this means that the two besieged leaders are finally biting the bullet and laying the groundwork for the sweeping changes needed to solve their formidable financial challenges.

    The plan will implement greater budget discipline with automatic sanctions for budget busters like Greece, who exceed the 3% of GDP deficit guidelines. Expect the European Financial Stability Council (EFSF) to move into action next year to help keep Greece in the monetary union.

    You can also expect the European Central Bank to launch some fireworks this week. Among them will be:

    1) ECB president Mario Draghi will cut interest rates by 25-50 basis points.

    2) The ECB will relax collateral rules for borrowing banks.

    3) It could also increase sovereign debt purchases of paper from the weaker countries, like Italy and Spain, from last week’s feeble $3.5 billion to as much as $20 billion a week.

    The bottom line here is to expect a lot of “feel good” news flashes in coming days, which could cause the Euro to edge back up to the top of its current trading range at $1.3550.

    But don’t hold your breath for any panaceas. The European treaty includes 27 members, with 17 employing the Euro as a common currency, and all have to agree to any changes. Substantial modifications will require national referendums. On top of that, Sarkozy is still blocking pan Eurobonds advocated by Merkel, which is the only supra national fund raising mechanism that can possibly work.

    The reality here is that Germany is imposing austerity and fiscal discipline on the rest of Europe, and non-Germans may not necessarily like it. So the next wave of optimism is likely to once again bear the bitter fruit of disappointment, taking the beleaguered European currency down to $1.29 in Q1, 2012.

    For those of you who have followed my advice to sell short the euro, there is an 800 pound gorilla in the room to deal with. The trading community is now short over 100,000 contracts in the futures market, an all-time high, matching the peak seen in the spring of last year, when the Euro just fell short of $1.60. The risk of a snap back rally going into the coming European love fest is high.

    I have noticed that in recent weeks, the market is allowing the nimble ever smaller profits from their quick in and out trades. This may be a function of the declining volatility going into the holidays and the year end. So those with itchy trigger fingers may want to take profits sooner than they usually might and celebrate Christmas early. The value of dry powder is rising. _

    The Mad Hedge Fund Trader
    Dec 19, 2011. 04:31 PM | Likes Like |Link to Comment
  • Price Action, Sentiment Favor Bulls, But What If Something Goes Wrong? [View article]
    I heard the magic words today from German chancellor Angela Merkel and French president Nicolas Sarkozy: “treaty changes”. That will be the gist of their joint proposal at the European summit this coming Friday to deal with the sovereign debt crisis.

    To me, this means that the two besieged leaders are finally biting the bullet and laying the groundwork for the sweeping changes needed to solve their formidable financial challenges.

    The plan will implement greater budget discipline with automatic sanctions for budget busters like Greece, who exceed the 3% of GDP deficit guidelines. Expect the European Financial Stability Council (EFSF) to move into action next year to help keep Greece in the monetary union.

    You can also expect the European Central Bank to launch some fireworks this week. Among them will be:

    1) ECB president Mario Draghi will cut interest rates by 25-50 basis points.

    2) The ECB will relax collateral rules for borrowing banks.

    3) It could also increase sovereign debt purchases of paper from the weaker countries, like Italy and Spain, from last week’s feeble $3.5 billion to as much as $20 billion a week.

    The bottom line here is to expect a lot of “feel good” news flashes in coming days, which could cause the Euro to edge back up to the top of its current trading range at $1.3550.

    But don’t hold your breath for any panaceas. The European treaty includes 27 members, with 17 employing the Euro as a common currency, and all have to agree to any changes. Substantial modifications will require national referendums. On top of that, Sarkozy is still blocking pan Eurobonds advocated by Merkel, which is the only supra national fund raising mechanism that can possibly work.

    The reality here is that Germany is imposing austerity and fiscal discipline on the rest of Europe, and non-Germans may not necessarily like it. So the next wave of optimism is likely to once again bear the bitter fruit of disappointment, taking the beleaguered European currency down to $1.29 in Q1, 2012.

    For those of you who have followed my advice to sell short the euro, there is an 800 pound gorilla in the room to deal with. The trading community is now short over 100,000 contracts in the futures market, an all-time high, matching the peak seen in the spring of last year, when the Euro just fell short of $1.60. The risk of a snap back rally going into the coming European love fest is high.

    I have noticed that in recent weeks, the market is allowing the nimble ever smaller profits from their quick in and out trades. This may be a function of the declining volatility going into the holidays and the year end. So those with itchy trigger fingers may want to take profits sooner than they usually might and celebrate Christmas early. The value of dry powder is rising.

    The Mad Hedge Fund Trader
    Dec 19, 2011. 04:30 PM | Likes Like |Link to Comment
  • Paulson Scales Back Position In GLD By Nearly $2 Billion [View article]
    The conspiracy theorists will love this one. Buried deep in the bowels of the 2,000 page health care bill was a new requirement for gold dealers to file Form 1099's for all retail sales by individuals over $600. Specifically, the measure can be found in section 9006 of the Patient Protection and Affordability Act of 2010.
    For foreign readers unencumbered by such concerns, Internal Revenue Service Form 1099's are required to report miscellaneous income associated with services rendered by independent contractors and self-employed individuals. The IRS has long despised the barbaric relic (GLD) as an ideal medium to make invisible large transactions. Didn’t you ever wonder what happened to $500, $1,000, $5,000, and $10,000 bills?
    Although the Federal Reserve claims on their website that they were withdrawn because of lack of use, the word at the time was that they disappeared to clamp down on money laundering operations by the mafia. In fact, the goal was to flush out income from the rest of us. Dan Lundgren, a republican from California's 3rd congressional district, a rural gerrymander east of Sacramento that includes the gold bearing Sierras, has introduced legislation to repeal the requirement, claiming that it places an unaffordable burden on small business.
    Even the IRS is doubtful that it can initially deal with the tidal wave of paper that the measure would create. Currency trivia question of the day: whose picture is engraved on the $10,000 bill? You guessed it, Salmon P. Chase, Abraham Lincoln's Secretary of the Treasury. _

    The Mad Hedge Fund Trader
    Dec 5, 2011. 03:07 PM | Likes Like |Link to Comment
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