Finance

• QE3 Has Already Started

  Most analysts have missed the fact that QE3 has already started in earnest. Of course, it would have been easy to miss. Ben Bernanke has not made any grand pronouncements. He hasn’t done some public thinking out loud, as he did among friends at Jackson Hole, Wyoming last August. It is not even called “QE3”. Think of it as a “stealth QE3”. But make no mistake. A new variety of quantitative easing has already begun in a big way, and is generating its desired effect. The new QE3 is the “RISK OFF” trade. QE2 ended up pouring $600 billion into…

• Why Jim Chanos is Wrong About China

  Hedge fund titan, Jim Chanos, is well known for his extremely bearish views on China. He says that the cracks are spreading on the façade, real estate sales are falling, and that the economic engine is starting to sputter. This will be bad news for the rest of us, as China imports 50%-80% of the world’s commodities. Commodity exporting countries will be especially hard hit, like Canada, Australia, and parts of the US. Modern China has only seen a bull market, and he doubts their ability to manage a true crisis. There is a widespread misperception that the government will…

• Getting Out at the Top: The Glencore Effect

  One of the greatest indicators that the music has stopped playing, the fat lady is singing, and it is time to get out of Dodge City, is the level of insider selling. Given the recent hyperactivity of the IPO calendar, it’s looking like it is a great time to take off on a long summer vacation. The commodities trading giant, Glencore, has lead the parade this year with a massive $11 billion IPO in Europe. The booty will be split up among a mere five individuals, making them all billionaires. Chinese networking giant, Ren Ren (RENN), hit the market for…

• Breakfast With PIMCO’s Mohamed El-Erian

  On the way back from a funeral in Los Angeles last weekend, I thought I would take a walk down Nostalgia Lane and have breakfast at the historic Langham Huntington Hotel, the venue for my senior prom. I was half way through my eggs benedict in the Terrace Room when, who sits at the next table, but bond giant PIMCO’s brilliant CEO and co-CIO, Mohamed El-Erian. That’s the last time he makes that mistake. I proceeded to grill him on the long term prospects for the global economy. Mohamed anticipates “a bumpy journey to a new normal”. Developed countries will…

• Why it’s Time to Bail Out Now

  Those looking for guidance on the medium term trend in the market better take a look at the best of breed, benchmark stocks for the leading sectors; the companies traders call “the generals”. I am talking about Goldman Sacks (GS), Apple (AAPL), Freeport McMoRan (FCX), and Google (GOOG). They are all telling us that the market peaked last February, not on April 29, as the indexes are suggesting. When the charts for the stock prices of the best run companies in the most profitable industries are rolling over like the Bismarck, you know that it is time to bail out.…

• The Markets are on a Knife Edge

  All global asset classes are within a hair’s breadth of completely breaking down.  The S&P 500 sits perilously on its neckline. Just below here there are a ton of sell stops that could pare 5% off the index very rapidly. The more volatile and leading emerging market ETF (EEM) has already broken this key level. Look also at the euro, which has been marching in almost complete lockstep with stocks. It has crashed through the 50 day moving average, and has so far struggled unsuccessfully to recover it. The flip side of all of this is the (UUP), a dollar…

• How to Build a Top

  Yes, we are all in the instant gratification business. We all want to ride an uptrend for nine months, sell at the top tick, and stay short for the entire four month selloff that ensues. In real life, it really only happens in the movies. If someone tells you they actually did this, you want to run a mile. I carry around in my wallet a tattered and dog eared SELL ticket for Nikkei futures that I wrote in 1989 at ¥38,800, right next to my spare condom. It has been 21 years since I came that close. The reality…

• Why I Am Selling the Market Here

  I have started batting out short positions as fast as the market can field them. To be more specific, I am buying puts and selling calls on the S&P 500 (SPX), loading the boat with the double short ETF (SDS), and unloading other asset classes as well. I get asked more questions about market timing than anything else. Why here? Why now? Let me give you a list of reasons I picked this particular week to hit the sell button. You will find a minestrone soup of fundamental and technical reasons. I try to use every tool in the bag…

• Take a Ride in the New Short Junk ETF

  When you look at the profusion of new ETF’s being launched today, you find that they almost always correspond with market tops. The higher the market, the greater the demand for the underlying, and the more leverage traders bay for it. The resulting returns for investors are disastrous. But occasionally a blind squirrel finds an acorn, and if you fire buckshot long enough, you hit a barn. That was the case a year ago when the corn ETF was launched (CORN), after five months of stagnant performance by the grain. I smelled a bargain for my readers, piled them into…

• Breakfast With Fed Governor Bob McTeer

  No one can explain the most complex economic and monetary issues in a simpler, more homespun fashion than former governor of the Federal Reserve, Bob McTeer. He is known for carrying around two yard sticks, one slightly longer than the other, to demonstrate to your average guy the monthly changes in employment. Bob argues that the Fed is getting a bad rap today. Ben Bernanke’s quantitative easing is neither inflationary, nor causing the collapse of the dollar. This “money printing effort” is not actually printing any money. The $1.7 trillion QE1 was designed to buy mortgage backed securities to bring…