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Weekly Market Update 2-3-16
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ThebiggestnewsthisweekisonceagainoutofJapan.AsI’venotedrecently,JapanisTHEgloballeaderforCentralBankpolicy.TheUSFederalReservelauncheditsfirstQEprogramin2008.TheEuropeanCentralBanklauncheditsfirstQEprogramin2015.TheBankofJapanfirstlaunchedQEbackin2001.Inshort,theBankofJapanhastwodecadesofexperiencewithQEANDZIRP.IthaslaunchedthesinglelargestQEprograminhistory(anamountequaltoover20%ofJapan’sGDP).Andithasexpandeditsbalancesheettoover65%ofJapan’sGDP.JapanfinallyimplementedNegativeInterestRatePolicyorNIRPlastFriday.Firstandforemost,Iwanttoassessthatthemarketsbarelyreactedtothis.TheNikkeispikedforroughly30minutesbeforeretractingALLofitsgains.
MycontactstellmethattherewasagreatdealofpressurefromtheBankofJapanonvariousinstitutionstobuystockswhenthisrallyfailed.Thus,itwasonlybygreatmanipulationandfocusedbuyingwasarallysustained.Let’sthinkaboutthisforamoment.TheBankofJapanimplementedNIRPforthefirsttimeinhistory.TheNikkeionlyralliedfor30minutesonthenews.AndittookactivebuyingfromJapan’splungeprotectionteamtostopacollapse.
WEEKLY MARKET UPDATE 2-3-16
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ThisstronglysuggeststhatJapanhasreachedthepointatwhichaggressivemonetarypolicynolongerhasanysubstantiveeffect.ThisseemstobeconfirmedbythefactthatdespitethestrongbounceonFridayandMonday,theNikkeihaserasedALLofitsNIRPgainsalreadyandisdownover1%.
AGAIN,JapanappearstohavereachedthepointatwhichadditionalmonetaryactionFAILStogenerateanypositiveeffects.Moreover,theunintendedNEGATIVEconsequencesofthismovearealreadyhittingJapan.
TheplannedMarchsaleof10-yearJapanesegovernmentbondsthroughbankstoretailinvestors,municipalitiesandotherswillbecanceledamidexpectedbelow-zeroyieldsfollowingtheBankofJapan’srecentmovetoadoptnegativeinterestrates.TheMinistryofFinanceisexpectedtoannounceWednesdaythefirst-everdecisiontocalloffsalesof10-yearJGBs.http://asia.nikkei.com/Markets/Tokyo-Market/Sales-to-individuals-to-be-called-off-over-negative-yields
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Thisisanincrediblesituation.InEurope,threeNIRPcutshaveforcedbondshigher(yieldslower)withoutresultinginsignificantbondmarketdislocations(canceledauctionsetc.).Spain’s10-yearcontinuestotrenddownward.
DittoforItaly.
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However,inJapan,thefirstNIRPcuthasalreadyresultedinamajorbondauctionbeingcanceledduetolackofinterest.IsuspectthisisbecauseJapanismuchfartherdownthemonetaryinterventionrabbitholethanEurope.Regardless,thesituationinJapanNEEDStobemonitoredclosely.WegetasenseofjusthowdesperatetheBankofJapanhasbecomeinthattheBank’shead,HaruhikoKuroda,emergedjustTHREEDaysafterimplementingNIRPtosuggest:
1) TheBankofJapancouldengageevendeeperNIRPcuts.2) Thereis“nolimittomonetaryeasing”theBankofJapancanemploy.
So…theBankofJapanlaunchesNIRPforthefirsttimeinitshistory.AndwithinTHREEtradingdaysisalreadypromisingtodoMORE,goingsofarastosaythatithas“nolimit”onwhatitwilltry.ThisiswhatitlookslikewhenaCentralBanklosescontrol=totaldesperationOncetheNikkeicollapsesbelowthegreenline,thingswillreallybegintogetinteresting.
InEurope,whilebondyieldscontinuetofall,thebanksareabsolutelyimploding.We’recreatinganewportfoliofocusedexclusivelyonthistrend.
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DeutscheBanks(DB)isonitswaytoZERO.
ActiontoTake:ShortDeutscheBanks(DB)Santander(SAN)isgoingtoZEROaswell.
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ActiontoTake:ShortSantander(SAN)Finally,let’smoveontotheUS.OneofourdominantthemesinPrivateWealthAdvisoryisthattheUSenteredarecessioninmid-2015.Bywayofintro,wehavetoask:justwhatcausesarecession?Theanswerisactuallysimplerthanonewouldthink:recessionsarecausedbysubstantialdropsinbusinessinvestment.Indeed,asthebelowchartfromSocieteGeneralshows,wheneverbusinessinvestmentdropsbelow0%inYear-Over-Yeargrowth,GDPcollapsessoonafter.
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Thelogichereissimple…businessescreatejobs.Whenbusinessinvestmentgrows(we’retalkingaboutorganicexpansionandhiring,NOTbuyinganothercompanyandlayingoffstafftoimprovesales),thebusinessisexpandingandpeoplearebeinghired.Whenbusinessinvestmentdropstheeconomysoonfollowssuit.Asyoucanseeinthechartabove,we’venothadadropbelow0%since2009.ThisislargelybecausebusinesseshavebeentakingadvantageoflowinterestratestoSpend!Spend!Spend!However,thiseraisnowending…AsI’venotedpreviouslybothcorporaterevenuesandcorporateprofitsarerollingover.Indeed,forQ42015,theblendedearningsdeclinewas-5.8%;theblendedrevenuedeclineforQ42015was-3.5%.Salesleadcorporateinvestment,whichinturnleadsthebusinesscycle.Inthesimplestofterms,companiescannotinvestingrowingtheirbusinessifsalesarenotcominginthroughthedoor.Theycanofcourseissuedebttoraisefundsforinvestment,butasI’venotedpreviously,mostcorporatedebtofferingsaregoingtowardsbuybacksanddividends,NOTinvesting,Well,corporatesalesarerollingoversharply.Asaresultcompaniesarenowactivelycuttingtheirinvestment/capitalexpenditures.
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Companiescuttingorflat-liningtheircapitalexpendituresin2016outpacethosethatsaytheywillincreasespendingbyafactorofmorethantwotoone,accordingtoaReutersanalysis.Companiesinindustriesasdiverse–andrelativelystrong–ashealthcare,consumergoodsandrestaurantsareamongthosetighteningtheirbeltsinyetanothersignthateconomicgrowthin2016maybeanemic.https://ca.news.yahoo.com/fearing-lean-times-u-companies-tighten-purse-strings-063332690–sector.html
TheUSisinarecession.Ithasbeeninanindustrialrecessionformonths.Itenteredaservicesrecessionlikelyattheendof2015.Movingontothemarkets.TheS&P500hitmytarget.Ithassincebeenrejected.AsIwritethis,stocksarebouncinghardduetoaverbalinterventionfromNYFedPresidentWilliamDudley.However,unlesstheS&P500cancleartheblueline,we’regoingDOWN.
Onamonthlyscale,stockshaveuntiltheendofMarchtohitnewhighs(above2,100)orthe
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bullmarketisdefinitivelyOVER.
Onadifferentnote,GoldisatTHElinetobreakbackintothewedgepatternthatdeterminedtradingforthreeyears.IfwebreakbackintothispatterntheoddsgreatlyincreasethatthenextMAJORlegupisbeginning.
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Finally,IwanttoassessourcrashtradesEEV,FXP,andBZQ.Obviouslywewereearlyonthesepositions,however,thetechnicalallpointtonewlows.EEM’sbounceisover.It’snowinthe2008-collapsegap.
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It’sthesamestoryforFXI…
ForEWZ,we’vealreadytakenoutthe2008lows,whichwillnowactasaceiling.We’regoingtothe2003lows!
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Mypointwithallofthesepositionsistoignoretheday-to-daygyrations.ThebigpicturechartsallpointDOWN.Thisconcludesthisweek’sissueofPrivateWealthAdvisory.I’mwatchingthemarketscloselyandwillissueupdatesasneeded.Butmycurrentviewisthatwe’llseeabriefrallyin“risk”overthenextweekorsofollowedbyanotherwaveofsharpselling.Barringanynewdevelopments,you’llnexthearfrommenextWednesdayinourregularweeklymarketupdate.UntilThen…
EditorPrivateWealthAdvisory
BestRegards,
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OPEN POSITIONS
Pricesasof2/3/16afterthemarket’sclose.Pricesincludedividends
US DOLLAR CARRY TRADE IMPLOSION PORTFOLIO
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
UltraBullishDollarETF UUP 5/23/11 $21.79 $25.1615%
UltraShortEuro EUO 4/10/15 $27.68 $24.26 -12% UltraShortYenETF YCS 5/27/15 $94.48 $83.07 -12%
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT PRICE
GAIN/ LOSS
Gold 3/17/10
$1,120$1,141.00
2%
Silver 3/17/10
$17.50$14.67 -16%
GoldMinersETF* GDX 5/13/15 $20.78 $15.32 -12% GoldMiningJuniorsETF GDXJ 1/27/16 $19.12 $20.10
5%
RELATIVE US STRENGTH PORTFOLIO
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
NuveenMuni.Fund NIO 1/2/14 $13.12 $14.70 26% Wal-Mart WMT 7/30/14 $74.78 $66.27 -7% Exxon XOM 9/24/14 $95.82 $78.48 -14% 7-10YrTreasuryETF UST 11/26/14 $55.54 $60.27 10%
20+YrTreasuryETF TLT 7/15/15 $116.89 $127.95 11% RPXCorp RPXC 8/5/15 $15.48 $11.60 -25% Apple AAPL 9/11/15 $114.21 $96.35 -15% SYSTEMIC RISK/ BLACK SWAN PORTFOLIO
*Avg.priceof$20.78and$14.20
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POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
Amazon(SHORT)* AMZN 2/25/15 $385.37 $531.07 -10% Netflix(SHORT) NFLX 1/27/16 $91.15 $90.73 0%
Pricesasof2/3/16afterthemarket’sclose.Pricesincludedividends
TECH BUBBLE 2.0 PORTFOLIO
MARKET HEDGE PORTFOLIO
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
UltraShortNikkeiETF EWV 1/6/15 $67.46 $56.25 -17%UltraShortEmergingMarketETF EEV 1/20/16 $31.27 $26.39 -16%UltraShortChinaETF FXP 1/20/16 $59.95 $54.97 -8%UltraShortBrazilETF BZQ 1/20/16 $110.71 $83.15 -25%EU MELTDOWN PORTFOLIO
POSITION SYMBOL BUY DATE
BUY PRICE
CURRENT
PRICE
GAIN/ LOSS
SpainETF(SHORT) EWP 1/22/16 $25.89 $25.15 3%
ItalyETF(SHORT) EWI 1/27/16 $12.05 $11.62 4%BarclaysPLC(SHORT) BCS 1/27/16 $10.37 $9.81 5%
DeutscheBank(SHORT)DB
2/3/16$16.65 NEW SHORT!
Santander(SHORT) SAN 2/3/16 $3.86 NEW SHORT!
*Avg.priceof$385.37and$583
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POSITION SYMBOL BUY DATE
BUY PRICE
SELL DATE
SELL PRICE
GAIN/
LOSS
Apple AAPL 4/2/14 $77.51 9/29/14 $98.84 28%
EuropeanFinancials(SHORT) EUFN 4/15/14 $24.89 10/10/14 $22.47 11%
UltraShortRussell2000 TWM 4/15/14 $49.46 10/10/14 $52.28 6%
UltraShortBrazil BZQ 10/15/14 $62.00 10/21/14 $71.92 16%
UltraShortGold GLL 10/24/14 $94.15 11/14/14 $104.21 11%
UltraShortSilver ZSL 10/24/14 $104.89 11/14/14 $122.00 17%
EnduroRoyaltyTrust NDRO 5/22/13 12.05 11/28/14 $7.06 -26%
UltraShortEuro EOU 1/20/15 $23.49 3/5/15 $26.51 13%
UltraShortBrazil BZQ 1/6/15 $91.07 3/6/15 $100.74 11%
Target TGT 5/28/14 $55.34 4/1/15 $82.13 52%
Pfizer PFE 7/30/14 $29.26 4/1/15 $34.56 20%
GeneralElectric GE 2/5/14 $24.57 4/13/15 $27.89 18%
BPPrudhoeBayRoyaltyTrust BPT 1/2/14
$76.775/20/15 $66.70 5%
ConocoPhillips COP 3/5/14$66.30
5/20/15 $65.27 4%
RussiaETF TRF4/9/15 $10.62 5/20/15 $11.36
7%
RECENTLY CLOSED POSITIONS
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POSITION SYMBOL BUY DATE
BUY PRICE
SELL DATE
SELL PRICE
GAIN/
LOSS
UtraShortOilETF SCO 5/27/15 $61.08 7/6/15 $70.30 15%
UltraShortGoldETF GLL 2/25/15 $95.49 7/7/15 $101.75 7%
Copper(SHORT) JJC 3/10/15 $31.35 7/7/15 $28.78 8%
UltraShortBrazilETF BZQ 5/27/15 $85.70 7/7/15 $92.02 7%
IndustrialMetalsETF UBM 3/25/15 $15.24 7/7/15 $13.56 11% UltraShortChinaETF(half) FXP 3/10/15 $36.45 7/8/15 $41.93 15%
UltraShortOilETF(half)SCO 7/21/15 $76.19 7/23/15 $82.14 8%
UltraShortBrazilETF(half)
BZQ 7/21/15 $91.39 7/23/15 $102.36 12% UltraShortBrazilETF(secondhalf)
BZQ 7/21/15 $91.39 7/24/15 $109.60 20% UltraShortOilETF(secondhalf)
SCO 7/21/15 $76.19 7/27/15 $87.36 15%
LinkedIn(SHORT)LNKD 6/17/15 $215.45 8/4/15 $194.96 10%
AustraliaETF(SHORT)EWA 1/6/15 $21.97 8/11/15 $19.85 11%
UltraShortEmergingMktsETF
EEV 1/20/15 $19.48 8/11/15 $21.56 11%
RECENTLY CLOSED POSITIONS CONTINUED
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RECENTLY CLOSED POSITIONS CONTINUED
POSITION SYMBOL BUY DATE
BUY PRICE
SELL DATE
SELL PRICE
GAIN/
LOSS
UltraShortChinaETF FXP 3/10/15 $36.458/19/15 $41.59 14%
ChinaRealEstateETF(SHORT) TAO 6/11/13 $20.11 8/24/15 $17.21 14% SouthKoreaETF(SHORT) EWY 8/18/15 $48.17
8/24/15 $43.82 10%
IndiaETF(SHORT) INP 8/18/15 $70.188/24/15 $59.38 18%
Santander(SHORT) SAN 8/13/15 $6.638/24/15 $5.99 10%
SpainETF(SHORT) EWP 8/13/15 $34.088/24/15 $31.38 8%
AustralianDollarETF(SHORT)
FXA 5/27/15 $77.368/26/15 $70.99 8%
UltraShortSilverETFZSL 7/29/15 $120.84
8/26/15 $132.02 9%
UltraLongS&P500 SSO 9/2/15 $56.129/9/15 $59.37 6%
UltraLongRussell200 UWM 9/2/15$79.20 9/9/15 $83.75 6%
CanadaDollarETF(SHORT)
FXC 5/27/15 $79.819/23/15 $74.47 7%
Canon(SHORT) CAJ 7/31/13 $30.849/23/15 $29.12 6%
UltraShortSemiconductorsETF
SSG9/18/15
$54.00 9/24/15 $60.2011%
UltraShortBrazilETFBZQ 9/22/15 $172.16
9/24/15 $199.00 16%
DeutscheBank(SHORT)DB
10/28/15$30.31 11/12/15 $26.17 14%
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RECENTLY CLOSED POSITIONS CONTINUED
POSITION SYMBOL BUY DATE
BUY PRICE
SELL DATE
SELL PRICE
GAIN/
LOSS
Santander(SHORT)SAN
10/28/15$5.70 11/27/15 $5.36 6%
UltraShortGoldETFGLL 7/29/15 $112.00
11/27/15 $117.38 5%
UltraShortOilETF SCO 11/12/15 $95.3512/2/15 $108.18
13%
UltraShortBrazilETF BZQ 11/12/15 $66.3212/2/15 $72.46
9%
BancoDeChile(Short)
BCH 8/18/15 $61.8912/8/15 $57.68 7%
RussiaETF(SHORT)RSX 12/2/15 $16.35
12/8/15 $15.32 6% UltraShortEmergingMarketsETF EEV 11/12/15 $22.14
12/8/15 $23.767%
SpainETF(SHORT)EWP
9/30/15$29.66 1/14/16 $27.64 7%
UltraShortEmergingMarketsETF
EEV12/17/15
$23.84 1/14/16 $25.316%
SingaporeETF(SHORT)EWS 9/22/15 $10.31
1/7/16 $9.57 7%
MexicoETF(SHORT) EWW 12/23/15 $51.151/7/16 $46.66 9%
FranceETF(SHORT)EWQ
9/30/15$24.07 1/11/16 $22.64 6%
Nvidia NVDA 6/26/13$14.14
1/13/16 $30.04119%
Auto-Zone AZO 9/25/13$422.73
1/13/16 $716.2169%
Intel INTC 12/20/13$25.14
1/13/16 $32.4036%
Target TGT 5/28/14$55.34
1/13/16 $72.6838%
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RECENTLY CLOSED POSITIONS CONTINUED
POSITION SYMBOL BUY DATE
BUY PRICE
SELL DATE
SELL PRICE
GAIN/
LOSS
Tesla(SHORT) TSLA 2/25/15 $203.761/14/16 $196.41 4%
UltraShortFinancialsSKF
9/18/15$52.39 1/14/16 $55.20
5%
EuropeanFinancials(SHORT)
EUFN1/6/16
$19.36 1/15/16 $18.02 7% UltraShortS&P500 SDS 9/18/15 $22.33
1/15/16$23.58 6%
MalaysiaETF(SHORT)EWM 9/22/15 $7.50
1/15/16 $7.16 5%
Kraft KHC 9/24/14 $56.811/15/16 $68.79
27%
McDonalds MCD 10/30/14 $92.871/15/16 $115.25
29%
Santander(SHORT)SAN
1/6/16$4.52 1/19/16 $4.19 7%
RetailETF(SHORT)XRT
1/13/16 $40.66 1/20/16 $38.01 7%
Coke KO 8/28/13$36.80
1/22/16 $41.8121%
GeneralElectric GE 2/5/14$24.57
1/22/16 $27.9120%
EliLilly LLY 12/3/14 $71.131/22/16 $83.09
20%
UniversalCorporation UVV3/5/15
$48.051/22/16 $52.23
12%
Pfizer PFE 7/30/14 $29.262/1/16 $30.16
8%
Microsoft MSFT 12/3/14 $48.082/1/16 $54.70
16%