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Mercenary Trader

 
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  • Saudi Arabia's Mental Paradigm Shift Confirms Triple-Digit Gold
    Tue, Dec. 23 GDX, GLD 12 Comments

    Summary

    • Saudi Arabia’s oil minister says that $100 oil may be gone forever. There can be no doubt… none, zero… that Saudi Arabia is trying to kill off high-cost marginal production.
    • Oil’s decline is brutal for commodities… and gold. The world fears deflation. Commodities are at 15-20 year lows. The dollar is strengthening.
    • If the paradigm shift is real then, at some point, the optimists have to throw in the towel.
  • It's Beginning To Look A Lot Like 1998
    Wed, Dec. 17 RSX, OIL, FCA 19 Comments

    Summary

    • If Russia defaults on its debt, foreign lenders could be exposed to $670 BILLION in losses.
    • We are in full-on “1998 mode” now. Various emerging market currencies are also hitting 16-year-lows versus the greenback.
    • Putin has no way out of this. But if Russia defaults, neither do global investors.
  • The Saudi Oil War Means Structural Sea Change; Risk-Off Turmoil Fuels Long Bond Strength
    Tue, Dec. 16 EDC, RIO, TBT 18 Comments

    Summary

    • Saudi Arabia is waging a crude holy war. We have seen this before - in the mid-1980s - and it is happening again.
    • For all the havoc US shale producers will face, others are being hit much, much harder by oil’s collapse.
    • Canada’s oil sands top the casualty list. After the US, Mexico and Brazil are next. Beyond that many non-OPEC producers, and even Norway, are facing a world of pain.
  • The 21st Century Will Belong To America - And Commodities And Emerging Markets Look Awful
    Tue, Dec. 9 EEM, FCA, UUP 52 Comments

    Summary

    • Underestimating the health, strength and resilience of the United States economy is perhaps the most persistent error in the history of global macro.
    • The world is orienting to a new era of American dominance. The implications of such are actually quite favorable.
    • Does American exceptionalism, then, extend to ongoing rampant bullishness for US equity markets? No, not at all.
  • Reflections On Page 16
    Mon, Dec. 8 FCG, OIS, XLE 3 Comments

    Summary

    • When the story shows up on a magazine cover, the biggest profits have generally been made.
    • We started shorting XLE and FCG in late August, based on a combination of price action and general scenario awareness.
    • Now “everybody” knows what is happening (or at least anyone who walks by a magazine stand)….
  • Fill 'Er Up (At Less Than 2 Bucks A Gallon)
    Thu, Dec. 4 AAPL, CLR, IAI 6 Comments

    Summary

    • According to GasBuddy, which tracks the numbers, the US national average for a gallon of gasoline is now $2.74. Meanwhile at a gas station in Oklahoma City it hit $1.99.
    • Brent crude — the global benchmark for oil prices — is currently just below $70. The unofficial Saudi target — is roughly fourteen percent lower.
    • Junk-rated energy producers have issued $90 billion worth of debt in the past three years.
  • The S&P Just Broke A Record Last Seen In 1928, Amid Further Signs December Looks Ominous
    Tue, Dec. 2 SPY, DIA 34 Comments

    Summary

    • After the October V-bottom, the S&P managed to close above its 5 day moving average for 29 straight trading days. That’s an all-time record breaker.
    • When you see a major volume surge — a major spike in buying or selling activity coupled with volatility expansion — the market is telling you something.
    • The Dow Transports are confirming the big “Uh-Oh” of high yield debt collapse.
  • Let Them Eat iPads: Why Wage Suppression Is Key To The Market Puzzle
    Editors' Pick • Tue, Nov. 18 AAPL, IWM, KBE 69 Comments

    Summary

    • Wages may be the key to everything. The Fed has kept rates near zero to bring a return of positive inflation and positive wage growth to the US economy.
    • But rising wages imply a normalization of interest rates. That, in turn, means the forced unwinding of all the gross excesses built up over the years.
    • Those differentials then make the dollar yet stronger, with brutal impact on multinational outlooks. Small caps, meanwhile, still enjoy historically rich valuations and will be hit with wage pressure too.
  • The Dollar Is A Lawnmower, The World Is Grass, And Emerging Markets And U.S. Multinationals Are Next
    Fri, Nov. 7 EEM, SPY, DIA 72 Comments

    Summary

    • The rise of the mighty US dollar is the biggest trend in the entire world...A massive trend that could last for years.
    • A rising dollar is the equivalent of a broad-blanket tightening of global credit conditions.
    • “Stage two” of the massive multi-year dollar bull run will be a slaughtering of US multinational profit outlooks.
  • Hawkish Fed No Friend To Bulls, Energy High-Yield Equals Crisis In Waiting, US Dollar All Systems Go
    Thu, Oct. 30 CAT, IWM, SPY 36 Comments

    Summary

    • "Don’t fight the Fed." This is a mantra for bulls when the Federal Reserve is supportive of easy monetary policy. But when the cycle turns, watch out.
    • The Federal Reserve deliberately targeted higher asset prices as a means of generating a “wealth effect.” They did this by encouraging corporate borrowing at near-zero rates.
    • But as David Lafferty of Natixis Asset Management points out to Bloomberg: “You can’t do a whole lot more cost-cutting and you can’t buy back a whole lot more stock….
  • IBM Is A Poster Child For The Value-Destroying Relationship Between Corporate America And The Federal Reserve
    Wed, Oct. 22 ABBV, FXI, RSX 28 Comments

    Summary

    • IBM has now seen ten consecutive quarters of falling sales. What has their response been? Financial engineering and more financial engineering.
    • With IBM stock at a multi-year low, tens of billions in buyback dollars have been wasted. That capital might as well have been shoveled into a furnace.
    • IBM is not a one-off. More likely a harbinger of dumb excess run amok, corporate America on the whole has gone down the financial engineering path.
  • Inflation Already Happened, U.S. Economy Strength No Reason To Buy, And QE4 Would Make Things Worse
    Mon, Oct. 20 7 Comments

    Summary

    • With deflation the returning boogeyman, it’s amusing to watch the inflation debate.
    • You have a group that essentially predicted, years ago, that disastrous inflation would come from the “money printing” of 2008 bailout efforts.
    • Our somewhat unorthodox view: Inflation already happened. It was just channeled into financial engineering and the rise of paper assets!
  • Bear Market For Energy Stocks Is Here To Stay, S&P's 200-DMA Cross Foreshadows More Selling
    Wed, Oct. 15 BABA, FCG, XLE 4 Comments

    Summary

    • Forget mere correction — crisis is already here for publicly traded energy companies. The energy sector has now declined more than 20%, putting it in a full-fledged bear market.
    • Saudi Arabia has committed to a dumping strategy of sorts, keeping markets flooded with supply in an attempt to hurt higher cost oil producers.
    • The S&P’s breach of the 200-DMA could have accelerated selling impact in the short-term because so many money managers use the 200-DMA as a “do not cross" line.
  • Profitless IPOs, German Slowdown, U.S. Strength Foreshadow 'Brutal' 12 Months For Equities
    Mon, Oct. 13 SPY, DIA, QQQ 10 Comments

    Summary

    • Premium stock valuations put the market in danger of an extended selloff.
    • The Federal Reserve kept interest rates near zero for years, creating all kinds of credit distortions in an effort to jump-start the US economy.
    • All of this activity, coupled with verbal support from global central banks and the psychological impact of QE, thus led to the incredibly extended valuations we now see.
  • Europe Woes, Small Cap Decline, Corporate Buyback Excess Fuels Deep Risk For Equities
    Wed, Oct. 8 IWM 10 Comments

    Summary

    • The euro has been facing a "plate glass" scenario - and the glass is now shattering. The euro is now likely to break below par ($1.00 US).
    • Tuesday's support break in small caps could be a very, very big deal.
    • Corporate buybacks have helped to fuel the rally, with S&P 500 companies spending 95% of profits on buybacks and payouts.
    • The buy and hold era is over. Stormclouds and thunder and lightning are rolling in.
  • The Alibaba Debut Bears Uncanny Similarity To A Year 2007 Top Event
    Tue, Sep. 23 BX, CCMP, IWM 2 Comments

    Summary

    • Stephen A. Schwarzman was dubbed the "king" of private equity by Fortune magazine.
    • Similarly, Jack Ma is now considered the "king" of e-commerce.
    • Both companies' IPOs could wind up coinciding with a clear top for equity markets.
  • Not Even Wrong: Why Data-Mined Market Predictions Are Worse Than Useless
    Fri, Sep. 12 JNK, UUP, SPY 30 Comments

    Summary

    • The standard deviation for the S&P the past ten days has been the lowest in 15 years. One writer believes this creates an 89% chance of bullish action.
    • This “89% chance” way of thinking makes no sense to us. In fact, we would consider it “not even wrong.”.
    • The potential trajectory of equity markets is directly impacted by the trajectory of debt and currency markets (which are the opposite of boring now).
  • The Euro's Pain Is Just Beginning, And Passive Indexers Are Asking For A Punch In The Face
    Thu, Sep. 11 FXE, EUO, ERO 6 Comments

    Summary

    • The euro (EURUSD) saw its biggest single-day drop in years this past Thursday. ECB president Mario Draghi surprised investors with the aggressive nature of his actions.
    • The story is nowhere near done. Europe is still asleep at the wheel… things will get much, much worse before they get better.
    • The eurozone is at risk of a deflationary downward spiral. Deflation is very hard to reverse.
  • Market Outlook: Too Much!
    Wed, Jul. 23 FDN, JNK, KBE 14 Comments

    Summary

    • We see too much divergence, too much complacency, too much downside risk in this market.
    • Small caps have broken trend while the Dow, S&P and Transports are near highs. The fed recently called out specific sectors as overvalued.
    • Stocks have gone up by 107% when earnings increased by only 53%. There is too much risk in this market.
  • Large-Cap Breakout Failure Is Ominous For Bulls
    Thu, May. 15 DIA, SPY, IYT 5 Comments

    Summary

    • The divergence between large caps and small caps has been ominous in recent weeks.
    • Today, large caps are breaking down - indicating a failed breakout.
    • As investment managers unload risk, the breakdown in blue chip stocks could continue.
  • How Do We Know The Bull Market Isn't Over?
    Mon, May. 12 DIA, IWM, SPY 16 Comments

    Summary

    • Mark Dow states: The bull market is not over, but it’s not a smart time to press your bets. The longer (for) this limbo, the more attractive the upside will become.
    • We say: How do we know it isn’t over? How does one quantify “over” versus “not over?"
    • What if the upside to be patient here is not in longs, but shorts?
  • Your Favorite Beloved Tech Stock Was Just A Giant Macro Bet
    Wed, May. 7 AMZN, CRM, KING 39 Comments

    Summary

    • The high-beta tech group has been slaughtered, even though the major indices have held up well.
    • Many investors are hoping for a comeback in these names.
    • Beyond a certain valuation level, the growth story itself no longer matters. Only capital flows matter — which are a function of the macro picture.
  • Death Of The Omnipotent Central Bank Narrative
    Tue, May. 6 GLD, IWM, OIL 49 Comments

    Summary

    • The "Omnipotent Central Bank Narrative" has dominated markets for the past five years. It has driven anything and everything before it.
    • The Omnipotent Central Bank Narrative is now drawing to a close. As equity markets cease to levitate, the mighty magicians lose their power.
    • The Fed's power is linked to crisis prevention measures. And now with the U.S. economy on the mend, the morphine drip has been put on last call.
  • Repeat After Me: Boring Is The New Sexy
    Thu, May. 1 SPY, DIA, IWM 13 Comments

    Summary

    • High-beta social media, biotech and cloud stocks have experienced a blood bath.
    • Yet large caps are within striking distance of all-time highs.
    • A reversal of the Fed's zero interest rate policy should continue to drive capital out of speculative stocks.
  • China To Bypass The United States... Blah, Blah, Who Cares?
    Thu, May. 1 FXI, UUP, UDN 31 Comments

    Summary

    • The Economist reports that China will become the world's largest economy by the end of the year.
    • But this moment in history is not the end of American dominance. If anything it is a beginning.
    • Being big is not reason to brag, or a necessary source of power - especially if beset by crisis and troubles and constant fires to put out at home.
  • Herbalife: Advantage Ackman?
    Thu, May. 1 HLF 131 Comments

    Summary

    • In 2013, hedge fund managers Bill Ackman and Dan Loeb took opposite bets on Herbalife.
    • Today, Herbalife's share buyback program has failed to materially boost the share price.
    • Could hedge funds who were squeezing Ackman be using the share buyback as an opportunity to exit?.
  • Tim Cook, Macro Genius
    Wed, Apr. 30 AAPL 16 Comments

    Summary

    • Apple has turned itself into a stable "widows & orphans" stock with stock split and dividend hike.
    • Investor flight to safety favors stocks with strong cash flow and safe business model.
    • Apple's surge does not reflect optimism for tech, but more capital flowing to safe businesses.
  • Sorry Twitter, They're Just Not That Into You
    Tue, Apr. 29 TWTR 83 Comments

    Summary

    • We're short Twitter heading into earnings.
    • A decisive shift in investor sentiment could send TWTR shares sharply lower.
    • Lackluster user engagement has been a challenge for twitter and will likely continue to pressure shares.
  • Is Shorting China The New Widowmaker Trade?
    Tue, Apr. 29 FXI 28 Comments

    Summary

    • A crisis in China is coming - the only question is how big it will be.
    • Timing is suspect and could be a long way off.
    • Price action currently favors "wait and see" rather than bearish exposure.
  • The Dollar Is Quiet... Too Quiet
    Tue, Apr. 29 Comment!

    Summary

    • There is a significant sea change underway from "risk on" to "risk off."
    • Markets will react to data from the Fed this week.
    • The impact of sanctions on Russia is impacting capital flows.
    • Never short a dull market - the U.S. dollar could be ready to move higher.
  • Tiger Soup
    Tue, Apr. 29 ARWR, CRM, FB 11 Comments

    Summary

    • Small caps and high beta tech names are in steep decline.
    • Julian Robertson's "Tiger Cubs" are caught in the crosshairs.
    • More selling could ensue as panic sets in and forced selling resumes.
  • Consumer Retail Stocks - Return Of The Bear?
    Tue, Jan. 14 LULU, BBBY, ULTA 1 Comment