The Mad Hedge Fund Trader-Tuesday
Global Market Comments
December 22, 2009
Featured Trades: (JOHN BRADY’S 2010 STRATEGY), (SPX), (TBT), (GOLD,(EWZ), (EZA), (XOM), (XTO), (CAP & TRADE), (A CHRISTMAS STORY)
December 22, 2009
Featured Trades: (JOHN BRADY’S 2010 STRATEGY), (SPX), (TBT), (GOLD,(EWZ), (EZA), (XOM), (XTO), (CAP & TRADE), (A CHRISTMAS STORY)
1)MF Global’s strategist for interest rate products, John Brady, seesthe S&P 500 rocketing 18% to 1,300 during the first half of 2010,driven by enormous productivity gains that are creating historic profitmargins. A flood of money should hit the market just after the NewYear. Let there be no doubt that the world is in risk accumulationmode. However, while monetary policy will stay on hold for possibly allof next year, long rates will start to rise because of the sheer volumeof Treasury issuance. Think the (TBT). Investors will then start takingprofits into June, prompted by the uncertainties of the midtermcongressional elections and a possible “W” recession. John thinks thatemerging markets will keep devaluating their currencies to keep exportscompetitive and stock markets flying, but watch out for the volatility.China is a special situation. By tying the Yuan to the dollar, they areletting Washington set their monetary policy, and guess what? Bubblesare contagious. Like the rest of the planet, John loves Brazil (EWZ),and also South Africa (EZA), where gold, a rising middle class, and aninternational trade hub are the motivating stories. We are in a secularbull market for the barbaric relic, with a rise to $2,200 feasible, butdon’t be surprised if we tick at $800 first. Commodities look greatlong term as a synthetic short dollar trade. But the buck could rallyuntil mid year before a new big down leg renews. He is also a peak oilbeliever, and thinks the recent Exxon/XTO Energy deal speaks volumesabout the shortage of supplies. It’s cheaper to drill on the floor ofthe New York Stock Exchange than 30,000 feet down in the Gulf ofMexico. To hear the full 40 minute interview, please go to Hedge Fund Radio by clicking here
2) You are about to be pounded senseless by competing sets of dataarguing that global warming is accelerating, not changing, or likeSanta Claus, doesn’t exist at all. You will be offered truckloads ofcontradictory, apple and orange comparisons which sound relevant tonon-scientists, but with which it is impossible to reach any meaningfulconclusions. With health care out of the way, cap & trade,alternative energy, and the restructuring of our energy infrastructurewill move to the head of the queue as the next battleground inWashington. A stubbornly high unemployment rate and a potential doubledip recession means that Obama could lose control of the house inNovember. So he has no choice but to ram through his most radicallegislation in 2010. The president certainly made no secret of hisdesire to wean the country off of imported oil during the election,which means that we have to come up with 20 million barrels a day ofcrude in energy equivalent or savings somewhere. The problem I havewith all of this is the environment is first and foremost anengineering issue. The last time I checked, both parties, even theirmost radical wings, agreed that the boiling point of water was 100 degrees C, the atomic number of carbon was 6, and the formula forcarbon dioxide was CO2. That won’t stop politicians from hijacking, emotionalizing, and clouding the issue. At stake is nothing less thanthe 10% of America’s GDP that the energy industry accounts for, and themoving of substantial economic activity out of Texas, Oklahoma, andLouisiana to the East and West coasts. Don’t expect this to happenwithout a knockdown, drag out fight. Since I believe that alternativeenergy will be one of the dominant investment themes of the coming newdecade, and have the luxury of a science background, I will be wadingthrough this morass attempting to provide readers with whateverinsights I can. Watch this space.
3) A CHISTMAS STORY
When I was growing up in Los Angles during the fifties, the mostexciting day of the year was when my dad took me to buy a Christmastree. With its semi desert climate, Southern California offered pinetrees that were scraggly at best. So the Southern Pacific Railroad madea big deal out of bringing trees down from much better endowed Oregonto supply holiday revelers. You had to go down to the freight yard atUnion Station on Alameda Street to pick them up. I remember a jollySanta standing in a box car with trees piled high to the ceiling,pungent with seasonal evergreen smells, handing them out to crowds ofeager, smiling buyers for a buck apiece. Watching great lumbering steamengines as big as houses whistling and belching smoke was enthralling.We took our prize home to be decorated by seven kids hyped onadrenalin, chugging eggnog. A half century later, the Southern Pacificis gone, the steam engines are in museums, anyone going near a railyard would be mugged or arrested for vagrancy, and Dad long ago passedaway. Dried out trees at Target for $30 didn’t strike the right chord.So I bundled the kids into the SUV and drove to the primeval, foggycoastal redwood forests of Northern California. Five miles down a muddylogging road, it was just us and a million trees. The kids, hyped onadrenalin, made the decision about which perfect eight footer to takehome. I personally chopped it down, tied it to the roof, and drove usthe three hours home. With any luck, these memories will last until thenext century, and long outlast me.
QUOTE OF THE DAY
“If I only has enough food, defeating the Russians would be child’s play,” said Napoleon in 1812.
“If I only has enough food, defeating the Russians would be child’s play,” said Napoleon in 1812.
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"The last time I checked, both parties, even their most radical wings, agreed that the boiling point of water was 32 degrees C, the atomic number of carbon was 6, and the formula for carbon dioxide was CO2."
I agree with the conclusion, but not the number 32C - try 100C (212F) for boiling, 32F or 0C for freezing.
Try converting that 20 million barrels per day to Joules and then see how many windmills that takes. All the alternatives always sound noble, but the reality is they will always need a SUBSIDY to compete. How do we play that game?
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Oops. that's what happens when the editor goes on vacation. Water does boil at 100 degrees C.
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