• 3 minutes Looming European Gas Crisis in Winter and North African Factor - a must read by Cyril Widdershoven
  • 7 minutes "Biden Targets Another US Pipeline For Shutdown After 'Begging' Saudis For More Oil" - Zero Hedge Monday Nov 8th
  • 12 minutes "UN-Backed Banker Alliance Announces “Green” Plan to Transform the Global Financial System" by Whitney Webb
  • 13 hours Microbes can provide sustainable hydrocarbons for the petrochemical industry
  • 3 hours Hunter Biden Helped China Gain Control of Cobalt Mines in Africa
  • 8 mins GREEN NEW DEAL = BLIZZARD OF LIES
  • 3 days Building A $2 Billion Subsea Solar Power Cable From Chile To China
  • 2 days Is anything ever sold at break-even ? There is a 100% markup on lipstick but Kuwait can't break-even.
  • 2 days Modest drop in oil price: SPRs vs US crude inventory build
  • 2 days 2019 - Attack on Saudi Oil Facilities.
  • 2 days Monday 9/13 - "High Natural Gas Prices Today Will Send U.S. Production Soaring Next Year" by Irina Slav
  • 4 days Ukrainian Maidan after 8 years
  • 4 days Peak oil - demand vs production
  • 5 days "How the CO2 shortage is impacting the food and drink sector" - Specialty Food Magazine
  • 5 days NordStream2
  • 5 days "Gold Set To Soar As Inflation Fears Mount" by Alex Kimani
Mad Hedge Fund Trader

Mad Hedge Fund Trader

John Thomas, The Mad Hedge Fund Trader is one of today's most successful Hedge Fund Managers and a 40 year veteran of the financial markets.…

More Info

Premium Content

The Ultra Bull Case for 2013

I am sitting here in front of my screens in utter amusement, befuddled, and gob-smacked. The weekend produced the worst case scenario from the "Fiscal Cliff" front lines: an ultimatum from Treasury Secretary, Tim Geithner, followed by finger pointing from both parties blaming the other for the impending economic disaster. It was a news flash worthy of a 600 point plunge in the Dow. What did we get? A piddling and flaccid 60 points instead.

The failure of the market to go down on horrific news leads me to consider that the ultra bull case for 2013 may be a real possibility. You have to notice that each violence-threatening comment emanating from politicians in Washington are generating market dips of diminishing magnitude.

Over the last five years, some $500 billion has poured out of equity mutual funds and $1 trillion flooded into bond funds. Virtually every category of investor is running equity exposures at historic lows. A reversal of these flows would trigger the mother of all bull markets.

Nobody in the investment community believes that the fiscal cliff will fail to get resolved. The problem is being vastly exaggerated by the media, now suffering from post partum depression that had us all glued to our TV screens during the presidential election. Some outlets are even posting "24" style countdown clocks to the exact time that financial Armageddon hits. Good for TV ratings, bad for your investment returns.

A fiscal cliff Grand Bargain could be the catalyst that triggers the great bond/equity risk reversal. The markets could get a further boost from our country's rapid conversion to "Saudi America" which will deliver ultra cheap and abundant energy for all. The Fed will raise the safety net, keeping good on its promise to keep interest rates at zero until 2015. It all adds up to a trifecta of good news that will send risk markets soaring.

This trifecta will have a double-leveraged effect on equity prices. Newfound confidence will push US GDP growth to the upper end of the recent range to 2.5%-3%, with much of the growth arriving in the second half. S&P earnings will jump from $100/share to $108/share. This will also fuel a multiple expansion from 14X to 15X.

Add all this together, and you get an S&P 500 clawing its way to $1,600 or more by the end of 2013, up some 13% from here.

The European Central Bank will continue its never-ending monetary stimulus, allowing the continent to bounce along a bottom at zero-growth, heading off a real crash. Southern Europe will remain mired in recession.

These are not such outlandish forecasts. However, we may have to endure one last hair raising "can kick" into 2013 before the real, sustainable move up starts in earnest.

If this Goldilocks scenario unfolds, you can expect technology, materials, gold, health care, and energy stocks to go through the roof. China finally bottoms, empowered by a new round of its own stimulus spending, now that its once-a-decade leadership change is completed.

These are not pie-in-the-sky predictions, but real possibilities. For that reason, I intend to cover my existing short positions in oil, the euro, the S&P 500, and the Russell 2000 on the next serious dip, and tilt more aggressively to the long side. The only remaining short I am happy to continue to cohabitate with is with the Japanese yen.

This dream scenario will probably not run for the entire year. But a good run is certainly in the cards for the first quarter of 2013.

By. Mad Hedge Fund Trader

Dow Jones Industrial Average 1

United States Oil Fund 2


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News