 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
| |
 |
at Men's Warehouse, drive Hyundai's, and work on salary for brokers. If they were paid based on
performance, there would be no need for Jenny Craig or Weightwatchers. Not that they are to be ignored.
They are right at least half the time. But their opinions are just one more thing to throw into the decision
making soup.
2) I spent the evening with Dr. Robert Frank, professor at the Cornell University School of Management,
and author of The Economic Naturalist's Field Guide. US consumer spending peaked at $10 trillion, or
73% of GDP in 2000, and in the new world of falling incomes and enforced savings rates, it will take many
years to come back. The current disaster was a guaranteed outcome, because while incomes stagnated
over the last 30 years, the median home size jumped 50% to 2,600 square feet. Deregulation poured
gasoline on the fire, enabling an unsustainable culture of leverage. California is in a real pickle, because
governor Arnold Schwarzenegger is forced to act as Herbert Hoover did by balancing a budget while
falling into a Depression. Dr. Frank argues that we should use this economic crisis to fundamentally
remake the US tax system. The current system taxes savings on multiple levels, but spending is tax free.
We need to scrap the income tax (three cheers), and implement a steeply progressive consumption tax.
We need to tax pollution the same way. Dr. Frank, who co-authored a previous book with Fed governor
Ben Bernanke, offers radical solutions. It seems that desperate times require desperate measures.
3) If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next
water crisis, so investment in fresh water infrastructure is going to be a recurring long term investment
theme. One theory about the endless wars in the Middle East since 1918 is that they have really been
over water rights. Although Earth is often referred to as the water planet, only 2.5% is fresh, and three
quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the
world's population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of
the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20
years. Aquifers in the US, which took nature millennia to create, are approaching exhaustion. While
membrane osmosis technologies exist to convert sea water into fresh, they use ten times more energy
than current treatment processes, a real problem if you don't have any, and will easily double the end cost
to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering
2,416 gallons of water to do the same. The UN says that $11 billion a year is needed for water
infrastructure investment, and $15 billion of the US stimulus package will be similarly spent. It says a lot
that when I went to the UC Berkeley School of Engineering to research this piece, most of the experts in
the field had already been retained by major hedge funds! At the top of the shopping list to participate
here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 32% since I
first brought it up. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE
Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and
Pentair (PNR). Who has the world's greatest per capita water resources? Siberia, which could become a
major exporter to China in the decades to come.
4) It appears that my website was one of the few that did not crash on news of the death of Michael
Jackson. I wonder why? Twitter survived its first serious crash threat when traffic spiked to 65,000 tweets a
second. AT&T's network did less well, and almost came down. That's better than Google's search engine,
which temporarily froze. Yahoo says they got the greatest number of clicks on a news story in its history.
The Internet was built to survive a nuclear war, but was taken down by the passage of a drug addicted
musician. You would think that the copyright holder on the Jackson titles, Sony (SNE), would do well, but
not so. Instead, Amazon (AMZN) stock took off, offering for sale the top ten selling Jackson CD's by the
King of Pop. Most of them sold out in a day. I guess it's a new world out there. Those with the best selling
machine, win. Our local winner? Butler Amusements bought four carnival rides at a Neverland Ranch
auction last year, and these can be ridden today at the Alameda County Fair. Talk about a windfall!
performance, there would be no need for Jenny Craig or Weightwatchers. Not that they are to be ignored.
They are right at least half the time. But their opinions are just one more thing to throw into the decision
making soup.
2) I spent the evening with Dr. Robert Frank, professor at the Cornell University School of Management,
and author of The Economic Naturalist's Field Guide. US consumer spending peaked at $10 trillion, or
73% of GDP in 2000, and in the new world of falling incomes and enforced savings rates, it will take many
years to come back. The current disaster was a guaranteed outcome, because while incomes stagnated
over the last 30 years, the median home size jumped 50% to 2,600 square feet. Deregulation poured
gasoline on the fire, enabling an unsustainable culture of leverage. California is in a real pickle, because
governor Arnold Schwarzenegger is forced to act as Herbert Hoover did by balancing a budget while
falling into a Depression. Dr. Frank argues that we should use this economic crisis to fundamentally
remake the US tax system. The current system taxes savings on multiple levels, but spending is tax free.
We need to scrap the income tax (three cheers), and implement a steeply progressive consumption tax.
We need to tax pollution the same way. Dr. Frank, who co-authored a previous book with Fed governor
Ben Bernanke, offers radical solutions. It seems that desperate times require desperate measures.
3) If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next
water crisis, so investment in fresh water infrastructure is going to be a recurring long term investment
theme. One theory about the endless wars in the Middle East since 1918 is that they have really been
over water rights. Although Earth is often referred to as the water planet, only 2.5% is fresh, and three
quarters of that is locked up in ice at the North and South poles. In places like China, with a quarter of the
world's population, up to 90% of the fresh water is already polluted, some irretrievably so. Some 18% of
the world population lacks access to potable water, and demand is expected to rise by 40% in the next 20
years. Aquifers in the US, which took nature millennia to create, are approaching exhaustion. While
membrane osmosis technologies exist to convert sea water into fresh, they use ten times more energy
than current treatment processes, a real problem if you don't have any, and will easily double the end cost
to consumers. While it may take 16 pounds of grain to produce a pound of beef, it takes a staggering
2,416 gallons of water to do the same. The UN says that $11 billion a year is needed for water
infrastructure investment, and $15 billion of the US stimulus package will be similarly spent. It says a lot
that when I went to the UC Berkeley School of Engineering to research this piece, most of the experts in
the field had already been retained by major hedge funds! At the top of the shopping list to participate
here should be the Claymore S&P Global Water Index ETF (CGW), which has appreciated by 32% since I
first brought it up. You can also visit the PowerShares Water Resource Portfolio (PHO), the First Trust ISE
Water Index Fund (FIW), or the individual stocks Veolia Environment (VE), Tetra-Tech (TTEK), and
Pentair (PNR). Who has the world's greatest per capita water resources? Siberia, which could become a
major exporter to China in the decades to come.
4) It appears that my website was one of the few that did not crash on news of the death of Michael
Jackson. I wonder why? Twitter survived its first serious crash threat when traffic spiked to 65,000 tweets a
second. AT&T's network did less well, and almost came down. That's better than Google's search engine,
which temporarily froze. Yahoo says they got the greatest number of clicks on a news story in its history.
The Internet was built to survive a nuclear war, but was taken down by the passage of a drug addicted
musician. You would think that the copyright holder on the Jackson titles, Sony (SNE), would do well, but
not so. Instead, Amazon (AMZN) stock took off, offering for sale the top ten selling Jackson CD's by the
King of Pop. Most of them sold out in a day. I guess it's a new world out there. Those with the best selling
machine, win. Our local winner? Butler Amusements bought four carnival rides at a Neverland Ranch
auction last year, and these can be ridden today at the Alameda County Fair. Talk about a windfall!
| Mad Hedge Ideas: S&P 500, Income, Water Crisis, and Michael Jackson by The Mad Hedge Fund Trader, June 29, 2009 |
1) As much as I like to open beer bottles with my teeth, do my own tattoos, and roll
around in the snow naked and beat myself with birch branches, when it comes to pain
in my investment portfolio, I am definitely a wimp. So I have to take notice when a
"Golden Cross" occurs on one of the major indexes, as happened with the S&P 500
on June 23 when it hit 888. For the initiated, a "Golden Cross" occurs when the 50
day moving average moves up through the 200 day moving average. Historically, this
means that the index will rise 7% in the next three months, 8% in the next six, and
19% over the coming year. The trouble is that if technical analysts were always right,
they would only wear Jon Green or Anderson & Sheppard suits, drive Bentley Turbo
RT's, and certainly wouldn't deign to talk to you. The harsh reality is that most shop
around in the snow naked and beat myself with birch branches, when it comes to pain
in my investment portfolio, I am definitely a wimp. So I have to take notice when a
"Golden Cross" occurs on one of the major indexes, as happened with the S&P 500
on June 23 when it hit 888. For the initiated, a "Golden Cross" occurs when the 50
day moving average moves up through the 200 day moving average. Historically, this
means that the index will rise 7% in the next three months, 8% in the next six, and
19% over the coming year. The trouble is that if technical analysts were always right,
they would only wear Jon Green or Anderson & Sheppard suits, drive Bentley Turbo
RT's, and certainly wouldn't deign to talk to you. The harsh reality is that most shop
| The Mad Hedge Fund Trader trades based on global long/short macro ideas backed by deep fundamental research View The Mad Hedge Fund Trader Read The Mad's Bio. |
|
HTML Comment Box is loading comments...
| Comments from The Oxen Group Readers Want to make a comment on the story above. Place your name and comment in the box below. Please remember that this area is for discussing and conversing with writers and other readers about finance issues. Do not use any foul or inappropriate language. Any comment deemed inappropriate will be automatically removed, and offenders will be tracked. |
| Sign up for The Oxen Group's free Daily Digest, featuring stock picks, financial articles and more. SIGN UP NOW AND RECEIVE THE OXEN GROUP'S FREE REPORT: Identifying the 5 Keys for a Perfect Fundamental Day Trade (Preview) |
