Monday, June 27, 2016

This is a serious situation and lots of confusion within Europe

I think the big thing is since the UK had a referendum, the propensity for the other countries to have a referendum grows. You're going to have countries such as Bulgaria who are marginally involved in the EU and just barely made it in. They are people in that country who are going to say, "you know what... what are the benefits ?" So there's all sorts of confusion, you have a federal elections coming up in Spain where its a very extreme right wing vs left wing. There's a lot of confusion embarked in Europe at this point and this only makes it worse.

The panic is over but now reality sets in as the world has to begin to try to understand just how truly serious and how tectonic plate-shifting was the British referendum last week. What we have come to accept as the status quo in Europe has been torn wholly asunder. That which was, isn’t, but that which shall be is wholly unknown. We are treading new ground.

Friday, June 24, 2016

BREXIT hammers the market pre-open

Gold in British Pound terms up almost 15 percent overnight

British Pound down 8 percent pre-market open

Related Articles

Dennis Gartman warning prior to BREXIT vote

Its a Bear Market

Monday, June 20, 2016

Brexit would propel Gold higher and push the Sterling and Euro lower

You want to be long the currency that should be the strongest and that would be Gold. You want to be short the currency or fund your Gold, that is weakest and that is the Sterling and second the Euro.


Thursday, June 16, 2016

Bear market making us reduce long positions

Because this is a bear market in global terms, we need to position ourselves accordingly; that is we shall increase our short derivatives positions today in our own retirement funds while we reduce our long positions, sufficient to get ourselves into a small net short position by mid-day. 

The world is a much more frightening place than it was only a few days ago; the prospects of a Clinton or a Trump presidency; the confusion underlying central bank policy making; the geopolitical circumstances of the moment all work together to cause is dismay rather than joy….. to cause confusion rather than confidence. We shall act accordingly.

Wednesday, June 15, 2016

Draghi should helicopter money

Draghi's comments I thought were very, very serious.  He's made it abundantly clear that there is not much more that they can do.

If you look at the Euro after his comments came out, the Euro gave up 70 pips almost immediately. I think they can do helicopter money and I think they should do that.

Monday, June 13, 2016

Bill Ackman's eventual demise will be a Greek tragedy

The purpose for this exercise is to learn the lesson that Mr. Ackman is learning the very hardest of ways: that the market is wiser and larger and fiercer than are we. We are but small, imperiled cogs in a huge machine that can and will grind us into oblivion. The best that we can do is make certain that we have our trading positions in line with the market’s main trend; that we align ourselves with forces larger than are we and that we never, ever deviate from that intention.

Mr. Ackman is heading toward investment oblivion. He is trapped in a trade that he cannot… and will not… get out of. His institutional clients will make the decision to get out for him as they demand that their remaining capital be returned and that as he raises that capital he is forced to sell his remaining shares in Valeant.

This is an enormous tragedy of huge proportions being played out here before our eyes. Mr. Ackman’s investors did not deserve this fate, but they are being forced to live it nonetheless. How truly sad. He averaged down…again… and again…and again… and again. His eventual demise is a lesson to us all. Would that we learn from it: This is Greek tragedy of the saddest kind. No one deserves this fate"

Friday, June 10, 2016

Bill Ackman losing position at Valeant could come back to haunt him

Concerning what has happened of late to Pershing Square and Mr. Ackman, we had a discussion with a friend in the hedge fund industry yesterday… a “rival” of Mr. Ackman’s… whose “take” on this question was most interesting. 

Our friend is convinced that Mr. Ackman’s effect upon the hedge fund industry may in the end by more dismaying than the effect that Mr. Madoff had upon it, for Madoff was a  matter of criminality that should have been discovered but was hidden for a long while from view, while Ackman’s actions have been long standing, inexorable and perhaps repeatable by others, creating fear amongst institutional investors who will, in the future, be unwilling and/or unable to put money at risk in these same manners. Money will not, in the future, allow itself to be gated, and in response the entire hedge fund industry will be diminished.

Here we have one of the true giants of the hedge fund industry; a gentleman once worth billions who ran billions more; a leader in the performance race for many years and now rather obviously a gentleman, who like Icarus of Greek mythology fame, flew too close to the sun and is now falling into oblivion"

When one averages down into a long position… or averages “up” into a short position… only one thing can be happening to the equity in one’s account: it must, by definition, be falling. If you buy a company’s stock at $25/share and it goes to $20/share, you are worth less than you were before. It cannot be otherwise. It is simple arithmetic. On the other hand, if you buy a company’s shares at $25/share and they go to $30/share your equity can only be larger. Why, we ask, would you wish for the former?"

We watched as US Airways’ stock fell from $125/share all the way to zero, with some of the great minds in the business having owned it… and having bought it… all the way down into oblivion. We watched as sugar prices in the early 70’s fell from $1.25/lb. to $0.03/lb., with buyers all the way down, and over the past three decades we’ve watched as the coupon on the long bond here in the US has gone from 14.25% to where it is today in single digits

Once again, averaging down into long positions while averaging up into short positions and continuing to do so even as the trend is clearly against one... is what we have referred to as the sole “carcinogen” in the investment/trading business. The demise of Nick Leeson; the collapse of Sumitomo Metals; the problem caused by Mr. Kerviel at SocGen… all came about by adding to losing positions and by disregarding risk. It is our duty to avoid such nonsense. Hopefully we shall continue to do so.

Wednesday, June 8, 2016

Oil prices to stay below $50

I wouldn't be surprised if we stabilized between the low $40's and the very low $50's for a long period of time.

The Iranians are surprising everybody by how swiftly they had been able to ramp up production. They're almost back to the levels of pre-sanctions, and they're going to get past those levels very soon.

The Saudis have made it abundantly clear that they intend to increase production because they see their own crude oil as a wasting asset that will basically be worthless in 25 years. They're going to be selling it as quickly as they can to get what money they can right now.

In the U.S., anything above $45-50 for spot WTI with a decent contango on the one-year and two-year forward curve gives you a very profitable level for almost any kind of fracker in any reasonable territory in the Bakken or in the Permian to produce.

You've also got 25-35 tankers filled with crude sitting just outside Singapore that’ll come to the market at any time. Is the oversupply over? No, it's going to get much worse. On balance, it's going to be very hard to push crude oil much above $50.

Tuesday, June 7, 2016

Market refusing to go down is a bullish sign

All the fundamentals would seem to indicate the market should go lower, but it doesn't want to go lower. Too many people are short. Too many people have no place else to go with their money. The trend seems to be from the lower left to the upper right. The next big move is probably still upward.

Monday, June 6, 2016

Venezuela selling Gold and will put pressure on gold prices for another couple months

People bought gold because they were concerned about equity prices. Gold was rallying very hard in January and February as the stock market was stumbling. When the stock market firmed up, the propensity to add to any long positions in gold was greatly reduced.

There's also been some rather aggressive sellers―primarily the Venezuelans―who've had no choice but to sell gold. They can't raise foreign capital or hard currency, and Venezuela needs hard currency.

Venezuela has made so many stupid decisions in the course of the past several years under Mr. Maduro. The country is the great producer of sludgy, heavy crude oil. To sell that crude oil, it has always had to mix it with better blends from abroad.

But it can't seem to buy any more because it doesn't have the money to do it. Thus, it’s been a seller of gold from its reserves, which makes Venezuela the dominant seller right now. They may have another month or two selling, at most. Once that's out of the way, gold prices probably will go higher.

Most of the monetary authorities, with the exception of the United States, are going to be easing monetary policies. The Japanese have no choice but to do so. The government deferred the sales tax increase that was supposed to go into effect next April for at least 2.5 more years. That will give the monetary authority at the Bank of Japan the ability to expand reserves even more aggressively. The Europeans have to do the same thing.

I like gold, but gold in euro terms and gold in yen terms is a far better trade than is gold in dollars.


Wednesday, June 1, 2016

Monsanto stock is worth minimum $130

I agree with Monsanto. I think they're worth at least $130 a share and my guess is that they will get that sort of number before too long

Why is Monsanto worth that much? It's an amazing company, it has led the world in GMO (genetically modified organisms) seeds. Genetically modification of seeds has given us such as increase in corn production, a huge increase in soybean production, strange products like cotton that comes out white. And I think Monsanto is worth that price. Eventually I think they'll get their price of $130.