Mad Hedge Fund Trader

Korean SK Telecom Boosts Handset Offerings to Take On the iPhone

ogol My guest on Hedge Fund Radio this week is Ed Merner, CEO of the Atlantis Japan Growth Fund (LSE-AJG), who has long been rated the number one stock picker in the Land of the Rising Sun. Ed’s fund, which trades on the London Stock Exchange, is up a decent 54% from the March bottom. When the ink was barely dry on the US Japan peace treaty in 1950, Ed’s father uprooted his family from rural Truckee, California, and moved them to Tokyo Japan. That gave him a front row seat to the economic miracle that followed in the fifties and sixties. Ed started managing money in Japan just a few years before me, in 1970. He toiled away as a portfolio manager at Schroeder’s & Co. in Tokyo for 25 years and then launched his own firm in 1995. Ed, who is a fascinating individual and a genuine nice guy, will discuss the long term opportunities for investing in Japan and Korea. To hear Ed expound on Japan and Korea at length, please go to my website by clicking here at www.madhedgefundtrader... .

Android’s Impact on Google’s Future

jfa When people ask me what is the one stock they should put in their kid’s college fund and forget about, I always give them the same company: Google (GOOG). The toll taker for the Internet that controls 70% of the global market for search just announced record Q3 profits of $1.6 billion on a revenue rise from $4 billion to $4.4 billion. In this economic environment these numbers are nothing less than astounding, making GOOG one of the few US firms that has actual top line growth. Google earnings, in fact, have turned into a valuable leading economic indicator by telling us that the strong ad growth came in the retail, travel, and the automotive sectors. This bang up performance is further proof that the irresistible tectonic shift away from old line media like newspapers, radio, and TV, to online, is accelerating, offering advertisers far and away the highest return on investment. Google is fast becoming the operating system for all advertising. While critics focus on the myriad ways the company recklessly burns money on peripheral businesses like Google TV, YouTube, forays into print media, and their private space program, I see gigantic growth opportunities that will prevent the company from becoming another Microsoft (MSFT). Mobile search grew 30% QOQ as the growing legion of sophisticated portable devices are increasingly used for search. Also, click rates cratered in the great recession, the price of “investment advisor” for example plunging from $4 to pennies. A recovery could bring an equally ferocious rebound in rates that fall straight to GOOG’s bottom line. Most analysts are now targeting the high $600s for the stock price, which I believe will prove conservative. If you are ever worried about America’s future, then just look at these two kids, Larry Page and Sergey Brin, who built a $400 billion company out of their dorm room at Stanford in virtually no time, with no capital. Just ignore the office foosball table, volley ball court, and at-desk massage service.

Not Everyone Likes Windows 7

nns Microsoft (MSFT) is about to hit you with a massive marketing effort to buy its new Windows 7 operating system, which will be officially released on October 22. I have been an early adopter of technology for most of my life, and have been doing my own tech support for 25 years (remember Evelyn?) Do yourself a huge favor and skip it. A number of beta testers have told me that this is the upgrade from Hell. Windows 7 doesn’t explode in your face when you first turn it on, but it comes close to it. If you have the 32 bit version of Vista, which most of you do, then you will only be able to install the 32 bit version of Windows 7, unless you want to go through a tortuous custom install. I shudder at the prospect of hunting down my lost original installation disks, web addresses of download sites, and long forgotten product keys. That defeats the purpose of the upgrade right there, as the 64 bit system was the main oomph behind the new version, enabling you to use more than 3 gb of memory at once. You will need 20 gigs of free disk space for the upgrade, which will put it out of reach of many laptops. If you do somehow get the 64 bit version installed, then many of your peripherals won’t work. If you are one of millions who were too terrified to take on Vista and are still using the antiquated XP operating system, forget it. There is no upgrade. Better to save yourself $120, and wait a year until you buy a new PC with Windows 7 preinstalled on it, with enough extra RAM to take full advantage of its real power. That gives Mr. Softy another year to debug it and come up with a product that really works.

S&P 500 New Highs Expanding... from a Low Base

ooh Fed chairman Ben Bernanke says the recession is “technically” over. This will be great news for the homeless living in the tent city under short finals who I fly over when I land my plane at Buchanan airport. It means “technically” they will eat tonight. It will also be welcome to the 18% of the workforce who are now unemployed in California, the 1.5 million who are losing unemployment benefits in the next three months, and one million college students who ran up and average $30,000 in debt to graduate this year so they could sleep on their parents’ sofa. Traders celebrated the news by running the S&P 500 up to 1,054, a positively nose bleeding 58% above the March 9 low. Apparently, the stock market thinks Obama is the greatest president in history, rising some 40% since the inauguration, compared to a 30% drop during the eight years of Bush rule. That is some report card I wonder what the results will be by 2012 and 2016? The only thing I approve of today is that this love fest took silver to a new high this year of over $17. Wake me up when the party is over, and I’ll drag your drunken carcasses into the car and drive you home. Then I’m going to cash in a couple of my silver dollars and take my significant other out for a Corona and some vegetarian burritos.

Cramer's Mad Money - United States Gas Fund Should Not Exist (9/10/09)

khk. Just when I get comfortable with my view on Natural Gas, I get a scratchy, reverberating cell phone call from one of the major formations telling me that I’m being way too bullish. Gas won’t bottom at $2. The free fall will continue until it hits $1. National storage will be completely full imminently top out, and when it does, theproducers will have to shut down completely. Since these guys are leveraged up the wazoo, this will trigger a string of bankruptcies, and the majors will fall like dominoes. A hedge fund bust won’t define thisbottom, as these guys are all playing from the short side. UNG can’t step in as a buyer of last resort, as the SEC won’t let it issue morestock, and the current shares are trading at a ridiculous 20% premium.One thing we do agree on is that the bottom will look ugly, whatever the spark is. You often get Armageddon type views near market bottoms,but this guy has been dead on right until now. Well, it takes two to make a market. Conclusion: keep NG nailed to your screen, as the widow maker is where the volatility lives.

Expecting a Sell-Off: 35 Ways to Protect for Less

aertt. Wow! One triple digit move down in the Dow, and all of a sudden, everyone is bearish. Once invisible falling home prices, soaring deficits, bogus corporate earnings, catatonic consumers, a crashing Shanghai market, and a suicidal Baltic Dry Shipping Index are now staring nervous stock owners in the face, eyeball to eyeball, and the picture is not pretty. Expect a run at Walmart on the Imodium and Kaopectate supplies. Even Robert Prector, of Elliot Wave fame, was on the tube proclaiming an end to a bear market rally. Did all the BSD bears just come back from family vacations to find the short selling opportunity of the year? Technical analysts think so.

Enormous Downside Risk for Stocks

It's even bigger a the end of today. There is no doubt that the next trade from here in stocks is a sell. Buying NASDAQ on a 12th consecutive up day, the S&P 500 on the back of a 110 point move, and the Dow on top of a 1,000 point pop is not what great fortunes are made of. After stopping out of my own shorts in the 880’s, I have been holding back, holding back, holding back. See my warning not to sell too soon at www.madhedgefundtrader.... I have never been one to fight the tape. The only trader who is always right is Mr. Market. The earnings to support a full fledged bull market are not just there. Deleveraging worlds don’t support expanding earnings multiples. It all works for me because the more it goes up now, the bigger the fall later. Even the raging bulls are warning about a “W” shaped recession and another market dive in 2010. How finely do you want to trade this thing? It’s clear the big core shorts at the major hedge funds haven’t budged, and that most of the recent low volume action has come from day traders, momentum players and CTA’s. All we need now is for mom and pop to come in and ring the bell at the top. Is 2009 going to be replay of 2008? Is a “Sell in May and go Away” at www.madhedgefundtrader... to be followed by another October crash? If your friends’ long positions make money from here, just revel in their good fortune, and let them pick up the dinner check.

Enormous Downside Risk for Stocks

For sure. Let me tell you that I, and the rest of the hedge fund industry, are highly suspicious of the global stock market rally that has ensued over the past week. Companies lowered earnings expectations so far they were easy to beat, and could be achieved by laying off a few more workers. The question this raises is how the economy moves forward with skyrocketing unemployment. Now that we have double topped in the S&P 500 at 956, even the bulls are saying we only have another 4% to go. This on a day when we are all wondering if commercial real estate loans will be the stick that breaks the back of the banking industry. Mike Mayo, a banking analyst with Clayon Securities, says that the industry may have to write off a quarter of its $7 trillion loan book over the next three years, levels greater than seen during the Great Depression. While banks are making a lot of money trading, they are losing it even faster in loan losses. It’s like trying to fill a barrel with water that has been perforated with a shotgun blast. If you are playing from the long side here, keep one foot in the exit, and a finger right on your mouse.

A Resolution to 'Sideways' Market Action Is Near

"Resolution" is the polite term. ) If anyone is wondering what that foul odor is, it’s the sushi that hit the fan. Even the most obstinate, nay saying perma bulls now concede the head and shoulders is in on the S&P 500. That great barometer of global risk taking, the Euro/yen cross, didn’t just break key support at ¥132.50, it completely melted down to ¥128.00. Oil traders have had an epiphany, rediscovering fundamentals like wayward sinners finding a new religion, which, by the way, are terrible. So how did crude double in the face of a collapsing economy? Was it speculators? Was it Goldman Sachs? “Green shoots” have returned to being those pesky things you get dirt under your fingernails ripping out of your back yard. If I get any more negative I am going to have to change the name of this letter to the “Assisted Suicide Daily.” So I have to finish on an up note. I’m not in the Armageddon camp, which sees us going to new lows below Satan’s 666. I think 750-800 is more realistic. But then I was always the one to take the easy money. If you get another Lehman bankruptcy type event, you could see a real crash. For the last two years, the market has had an unceasingly ability to come up with these shocks.

Fast Money Recap - Is This Apple Rumor True? (4/28/09)

BIDU is a win. If you need further proof of where the future growth in the global economy is coming from, take a look at Bidu (BIDU), the Google of China, which I strongly recommended on March 6 (www.madhedgefundtrader...). It has jumped 280% from the lows to $280, and has been one of my better calls of the year. In the meantime, our Google (GOOG) rose by only 48% to $435, just 8% more than the S&P 500. These hedge fund darlings are best of breed companies, but the Chinese one outperformed the American counterpart by a factor of 6:1. This is the consequence of the US economy making a permanent shift from a 5% growth rate to 1.5%-2%, and is a pattern you can expect to see repeated around the world for the next decade. The cruel truth here is that American companies, with the drag of a mature economy, will never command the same multiples of Chinese ones. When looking for long equity exposure, always look for Chinese ones first. Expect huge growth of the four horsemen of the Chinese Internet sector-Netease (NTES), Sina (SINA), and Sohu (SOHU), and BIDU- who are going to eat our lunch.

10 Option Ideas on Extremely Bullish Stocks

I'll go for BIDU on a dip. If you need further proof of where the future growth in the global economy is coming from, take a look at Bidu (BIDU), the Google of China, which I strongly recommended on March 6 (www.madhedgefundtrader...). It has jumped 280% from the lows to $280, and has been one of my better calls of the year. In the meantime, our Google (GOOG) rose by only 48% to $435, just 8% more than the S&P 500. These hedge fund darlings are best of breed companies, but the Chinese one outperformed the American counterpart by a factor of 6:1. This is the consequence of the US economy making a permanent shift from a 5% growth rate to 1.5%-2%, and is a pattern you can expect to see repeated around the world for the next decade. The cruel truth here is that American companies, with the drag of a mature economy, will never command the same multiples of Chinese ones. When looking for long equity exposure, always look for Chinese ones first. Expect huge growth of the four horsemen of the Chinese Internet sector-Netease (NTES), Sina (SINA), and Sohu (SOHU), and BIDU- who are going to eat our lunch.

Equity Markets: Just a Pause or Something More?

How about something more. OK guys, it’s May. Go Away. I mean vamanos, andele, raus, ike nasai! You’ve just had the best two month run in 30 years. It’s time to sit down and smell the roses. Go climb that Alpine peak you’ve always wanted to attempt, finish off that basement, or take the misses down to Cabo. Maybe your nine iron needs some work. Whatever. There are no decent risk/reward trades in the market right now. All of my long recommendations, like emerging markets, commodities, crude, and junk bonds, are though the roof. My shorts have cratered, with the 30 year Treasury bond futures down a whopping 20 points, from 142 to 122. All of my longs are way overbought, and my shorts are oversold. I can’t in good conscience ask traders to just sit on big unrealized profits. Never slap a double in the face, especially in this environment. Nobody ever got fired for taking a profit. Always leave the last ten percent for the next guy. There is no law that says you have to trade every day of the year. Better to reestablish at better prices, like in August. If you strapped on any of these trades, the first four months of 2009 gave you a great year. If you didn’t, don’t break your back playing catch up. It’s not worth it. As for me? I’m going down to Vegas to shop for condos at ten cents on the dollar and do some actual gambling.

Weekly Street Sentiment: Where Have All the Reasonable People Gone?

I don't like it. There is something wrong with this picture. The Chinese stock market is shouting at us that the bull market is back, while the price of crude is telling us in more surreptitious tones that this is a bear market rally that will fail. If we were in a true economic recovery, crude would have run back up to the $70-$90 range by now. Who is right? Certainly large scale Chinese buying of economically sensitive commodities like crude and copper has been the hallmark this seven week move in global equity markets, which have brought a welcome $7 trillion boost in valuations. But how much of the move has been mere short covering? What is the extent of the dead can bounce? Until a recovery in corporate earnings signals the “all clear” we could be stuck in a trading range here, possibly until the end of the year, and maybe for years. “Sell in May and go away” is looking better by the day. Sell a few short dated calls above the market against your long positions. Pass the sunscreen?

Should Google Be Paying a Dividend?

Yes, they must pay! Google (GOOG) CEO Eric Schmidt says it is obvious that the news is bad and getting worse, that we are not at the bottom yet, and have some quarters to go. Watching traffic it is clear that advertisers are tightening budgets, but the numbers of online advertisers is increasing. The recovery will start first in the US and then spread overseas. However, the company does not expect any fall off in its own revenues. Does Google own the planet, or what?

With a King's Ransom in Cash, Why Still No Buying Spree in the Tech Space?

Here is a nice early spring mustard seed. Intel (INTC) announced they plan to invest $7 billion in new factories in Arizona, New Mexico, and Oregon, hiring 7,000 workers. The company in the past has said that high costs, over regulation, and unreliable power supplies will prevent it from ever again building a major manufacturing facility in California. The plants will build low energy chips using the next generation 32 nanometer technology. At least this round is not going to China. Only the big cap tech companies have the cash to pull this off.