It was a great event. John Thomas, one of our guest speakers had some really good points about what the Trump win will mean for the markets going forward.
I wanted to share some of his insight with you. Here is his special report on how the election will affect your trading.
From the desk of John Thomas:
In 50 years of trading, I have never seen markets turn on a dime as they did last week. As a result, they have created some of the best trading opportunities of the century.
The sector rotation has been fast and furious. And trading volumes across all asset classes exploded to their highest levels in years.
Of course, they were responding to the biggest election upset in history, which flipped the direction of the global economy 180 degrees in a heartbeat.
I am suddenly reminded of economist John Maynard Keynes’ most famous quote: “When the facts change, I change. What do you do sir?”
My ancestors hailed from Missouri, before they moved to California during the1849 gold rush. Their black and white tintypes adorn the walls of my Lake Tahoe estate.
Every time I cross Donner Pass on Interstate 80, I remember their gaunt grim faces.
And you know what the state motto of Missouri is?
“SHOW ME!”
Incredible as it may seem, I am already in touch with several senior officials of the Trump administration, thanks to my ancient Wall Street ties.
That will give me an early read on which Trump policies are campaign fluff, which will be seriously watered down, and the few that will get actually implemented.
And as everyone in the financial markets knows, this is trading gold.
Early indications are that the incoming economic policies will be Reagan 2.0.
I remember well the jovial, backslapping president, who served from 1982-90, and who I knew too well for 25 years.
For three decades, he campaigned from the far right, championing McCarthyism, bemoaning Rowe versus Wade, demanding a balanced budget, and constantly warning of the communist threat.
The day he got into office he forget all of this, negotiating huge arms reductions treaties with the Russians, and never lifting a finger to curtail women’s rights.
We do know how Reagan 1.0 ended. Thanks to large tax cuts and massive spending increases, the national debt skyrocketed 400%, from $1 trillion to $4 trillion. The bond market got killed.
And despite all his saber rattling on the campaign trail, Reagan never ensnared America in a single serious war.
Trump could well do the same. The big shock of the decade would be how fast trump rushes to the middle.
But he has to “show me” first.
I am expecting a similar result with Reagan 2.0. Certainly the bond market thinks so, the ten year Treasury yield adding a hair raising 40 basis points in yield in a mere three days.
What we do know for sure is virtually the entire investment industry has been caught seriously wrong footed by the Trump win.
They were all, to a man, perfectly positioned for was a Clinton win, and owned a heavily weighted Clinton portfolio.
What they got was a Trump world.
IT WILL TAKE YEARS FOR INSTUTIONS ROTATE SECTORS, AND REPOSITION FOR THE NEW WORLD ORDER.
This is nothing less than the greatest gift to traders of all time.
There is one great structural tailwind to this unbelievable sector rotation.
It takes you out of over owned expensive sectors close to all time highs that have been leading the market for most of this decade, like technology.
It moves you into under owned cheap sectors that have been despised for years, such as financials, heath care, commodities, and energy.
That’s fine with me. I was getting tired of chasing technology for small incremental gains at the risk of gigantic one day crashes, some four in the last 15 months.
You can make a lot more money buying stocks off of 5 year bottoms than seven year tops.
Maybe I can squeeze a few thousands basis points of performance out in 2016?
I have presented four Emergency Strategy Webinars for major hedge funds, clients, and the Online Trader’s Summit in as many days.
Financial advisors tell me they are finding the bullet points contained enormously helpful in explaining the New World Order to their clients.
So I am giving them in full to you below:
The New World Order
*Control of the Presidency, the House of Representatives, the Senate, and the Supreme Court means the Republicans have a free hand
*Republicans blocked fiscal spending for eight years, but will now move full steam ahead
*$1 trillion in new infrastructure spending in the Midwest amounts to Quantitative Easing 5.0
*Massive Keynesian stimulus could double US
economic growth in the short term
*Inflation will make an earlier return
*It all adds up to a big “RISK ON” and “BUY!”
The New Big Trends
Out With the New, In With the Old
Winners:
Value
The Economy
Deregulation
Taxpayers
Domestic US stocks
Defense Stocks
Inflation
Oil & Gas
Commodity Stocks
Bridges and Freeways
The Midwest Rust Belt
The US Dollar
Savers
Homeowners
Cheap Stocks
The New Stock Plays
Get These Right and You’ll Retire Early
(CAT)– Caterpillar-Infrastructure
(X)– US Steel- infrastructure
(NUE)– Nucor – Steel
(PFE)– Pfizer-Big Pharma
(LLY)– Ely Lily – Big Pharma
(LMT)– Lockheed Martin - Defense
(FCX)– Freeport McMoRan – Commodities
(XOM)– ExxonMobil – Big Oil
(OXY)– Occidental Petroleum – Energy
(BAC)– Bank of America – Financials
(GS)– Goldman Sachs - Financials
(LEN)– Lenar Homes- Homebuilding
Losers:
Growth
Globalization
Regulation
Multinational Stocks
Telecom and Utilities
Emerging Markets
The Budget Deficit
Solar Energy
Bonds
Yield Plays
The Euro
The Japanese Yen
Borrowers
Renters
Expensive Stocks
The Old Stock Plays
Time to Say “Thank You Very Much” and Unload
(GOOG)– Alphabet- Technology
(AAPL)– Apple- Technology
(FB)– Facebook-Technology
(AMZN)– Amazon - Technology
(TSLA) - Tesla– Electric Cars
(FSLR)– First Solar - Solar Panels
(SPWR)– SunPower – Solar Panels
(GM)– General Motors – Globalization
(EWW)– Mexico ETF
(FXI)– China ETF
(FXE)– Euro ETF
(FXY)– Japanese Yen ETF
(GLD)– Gold
(T)– AT&T - Telecommunications
Growth
Globalization
Regulation
Multinational Stocks
Telecom and Utilities
Emerging Markets
The Budget Deficit
Solar Energy
Bonds
Yield Plays
The Euro
The Japanese Yen
Borrowers
Renters
Expensive Stocks
The Old Stock Plays
Time to Say “Thank You Very Much” and Unload
(GOOG)– Alphabet- Technology
(AAPL)– Apple- Technology
(FB)– Facebook-Technology
(AMZN)– Amazon - Technology
(TSLA) - Tesla– Electric Cars
(FSLR)– First Solar - Solar Panels
(SPWR)– SunPower – Solar Panels
(GM)– General Motors – Globalization
(EWW)– Mexico ETF
(FXI)– China ETF
(FXE)– Euro ETF
(FXY)– Japanese Yen ETF
(GLD)– Gold
(T)– AT&T - Telecommunications
The Bond Market: The Fat Lady is Singing
Sell Short every 5 Point Rally in the (TLT) for the next Ten Years
*Bonds are Toast
*The first fiscal stimulus in eight years will pour $1 trillion into infrastructure
spending
*Taxes will be cut across the board, concentrated for the wealthy and business
*Replenishing of the military adds further spending demands
*All of this adds $10 trillion to the national
debt in 8 years
*Throw in a new war and that doubles
to $20 trillion
*Is a replay of the 400% rise in national
debt under Reagan during 1982-90,
when Treasury bond yields hit 12%
*Interest rates will rocket, Buy the (TBT)
Sell Short every 5 Point Rally in the (TLT) for the next Ten Years
*Bonds are Toast
*The first fiscal stimulus in eight years will pour $1 trillion into infrastructure
spending
*Taxes will be cut across the board, concentrated for the wealthy and business
*Replenishing of the military adds further spending demands
*All of this adds $10 trillion to the national
debt in 8 years
*Throw in a new war and that doubles
to $20 trillion
*Is a replay of the 400% rise in national
debt under Reagan during 1982-90,
when Treasury bond yields hit 12%
*Interest rates will rocket, Buy the (TBT)
Foreign Currencies-Dollar Rally Continues
*Rising interest rates have the US dollar rocketing against all other currencies
*Interest rate differentials are the biggest driver of foreign exchange rates
*Buy the (UUP) ETF, calls, call spreads, and futures on dips
*Yen fundamentals are as bad as ever, will be the last to raise interest rates, if ever, expect a long term decline, sell short (FXY), or buy the (YCS)
*Future of Euro is dependent on an EC breakup, or not
Energy-The Double-Edged Sword*Rising interest rates have the US dollar rocketing against all other currencies
*Interest rate differentials are the biggest driver of foreign exchange rates
*Buy the (UUP) ETF, calls, call spreads, and futures on dips
*Yen fundamentals are as bad as ever, will be the last to raise interest rates, if ever, expect a long term decline, sell short (FXY), or buy the (YCS)
*Future of Euro is dependent on an EC breakup, or not
*Stronger economy is oil positive
*But a trade war with China, the world’s largest marginal new consumer, could cause demand to slow there
*Any run up to $60 will see new US fracking
production pour into the market
*So sell rallies up to $52, buy dips to $40
Precious Metals-Trumped!
*Spiking interest rates are hugely negative for gold
*Current selloff creates a great entry point
for long term investors
*When inflation really show, that I
when you want to pile back into gold
*China and emerging nations have to buy
several thousand tonnes to bring
holdings up to western level
Should take prices from $1,250 to
$5,000 an ounce in 15 years
*Spiking interest rates are hugely negative for gold
*Current selloff creates a great entry point
for long term investors
*When inflation really show, that I
when you want to pile back into gold
*China and emerging nations have to buy
several thousand tonnes to bring
holdings up to western level
Should take prices from $1,250 to
$5,000 an ounce in 15 years
Real Estate - A 20-Year Boom
*Millennial demographic wave is about to drive US home prices northward for the next 20 years
*Only 2.4 million homes for sale, down -6.8% YOY, creating a severe shortage, normally rises in the fall, and predicts a very hot market in the spring
*US homebuilding is proceeding at less than half the peaks seen in the 2000s, despite rapidly rising demand, creating a structural shortage
*Home equity has been the top
performing individually owned
asset class for the past 5 years
*All this makes homebuilders a big
long term “BUY”
Trade Sheet- So What Do We Do About All This?
*Stocks- Buy
*Bonds-Sell
*Commodities-Buy
*Currencies- Sell
*Precious Metals –Buy
*Real Estate-Buy
*Stocks- Buy
*Bonds-Sell
*Commodities-Buy
*Currencies- Sell
*Precious Metals –Buy
*Real Estate-Buy
Quote of the Day
Managing money is going to be fun over the next six months,” said Jeffrey Gundlach of Double Line, on the surprise Trump election win.
Managing money is going to be fun over the next six months,” said Jeffrey Gundlach of Double Line, on the surprise Trump election win.
For more information on John Thomas, visit www.madhedgefundtrader.com.
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