There’s nothing like trading a constitutional crisis. It’s been a while since I’ve done that.
But you know what? So far, so good.
Of course, suddenly, everyone has become a Watergate scholar. But few were trading the markets 45 years ago, as I was when the political scandal of the century first broke. And this is what the many talking heads are missing. The Watergate scandal was only the sixth most important crisis that was happening at the time.
The US had just pulled out of Vietnam, creating a massive drain on the US Treasury and the loss of 60,000 working age men.
It tore the county apart, nothing like we are seeing today.
President Nixon took the US off of the gold standard and floated the dollar, leading to its immediate collapse against all foreign currencies and a massive commodity bubble.
Another Middle Eastern war triggered the first oil shock, an overnight 400% increase in the price of oil to $12, long lines at gas stations, and a huge recession.
Lights were dimmed throughout the nation.
And you were worried about a break in at the Democratic Party office in the Watergate office complex?
The easy thing to do then was to buy gold at $35 an ounce, sell short the dollar, and laugh all the way to the bank.
Having spent 1968 and 1969 traveling around Europe, I was one of few Americans who knew about these things.
I remember when I got picked up hitch hiking by a van full of Oxford students headed to the continent solely so they could qualify for a larger foreign exchange limit, then capped at £50 per person.
They dropped me off in Bulgaria.
And as a sideline back home I rehabbed old Volkswagen Bugs from the 1950s, the highest mileage cars then available.
And now for another “Only in America” story.
I stumbled across a staggering piece of information the other day.
Working with the trust attorney for my personal family office, I discovered that the probate industry is booming.
Countless investors in the San Francisco Bay Area bought Amazon (AMZN) and Apple (AAPL) on the initial public offerings on some wild broker tip, squirreled the shares away in portfolios, forgot about them, and then died.
In the meantime, a dollar invested in Apple 20 years ago is now worth $250, while in Amazon it is worth $500!
Today, heirs expecting to inherit a few thousand dollars from deceased parents are suddenly being hit with windfalls in the hundreds of millions.
And they get this money tax free, as the cost basis is stepped up to the current market value upon the death of the original owner.
This is setting off huge estate battles among the heirs, and a new Golden Age for estate attorneys.
Indeed, I was only able to get a hold of my own attorney after he came out of a two-week trial over a $500 million chunk of Apple stock fought over between warring children.
The market capitalization of Apple today is $802 billion, while Amazon stands at $463 billion, and the bulk of their stock is owned by individuals living within 50 miles of San Francisco.
That is an immense amount of wealth to spread around such a small area.
No wonder I see so many new Teslas on the road these days.
As much as I vowed not to jump too soon back into the market during the annual May selloff, I found the bond market last week just too tempting to sell short.
With the Fed expected to raise rates a quarter point on June 13th, going short the US Treasury bond market (TLT) at a 2.20% yield for the ten year was a complete no brainer.
Here we are a day later, and I am already up 10% on the position.
Old trader rule number one: when the market hands you a gift, you grab it with both hands.
On Monday, May 22nd, at 9:45 AM EST, the first report of the week is the MayChicago Fed National Activity Index, a weighted average of 85 monthly economic indicators.
There is also a panoply of three Fed speakers, no doubt paving the way for theJune 13th rate hike.
On Tuesday, May 23rd, at 10:00 AM EST, we receive the New Home Sales for May, undoubtedly confirming the red hot trend in the industry.
On Wednesday, May 24th, at 2:00 PM EST, we receive the Existing Home Sales.
The weekly EIA Petroleum Status Report is out at 10:30 AM.
On Thursday, May 25th, at 8:30 AM EST, we learn the Weekly Jobless Claims. Will we hit yet another 43-year low, confirming the full employment economy?
On Friday, May 26th, at 8:30 AM, we learn the next read on Q1 GDP. We should get a bounce back on the previous 0.70% read.
Wrapping up the week at 1:00 PM is the Baker Hughes Rig Count which has been up for most of the last year, boding ill for oil prices. Last week saw a doubling of year earlier rig numbers.
As for me, I’m headed for SFO and boarding a 15-hour flight to Auckland, New Zealand.
I will take my readers’ advice and try not to get dragged off the plane.
Hopefully, they’re not manhandling the passengers in First Class yet.
38.55% Trade Alert Trailing One-Year Return
Budding Currency Trader
If you find this kind of trading advice helpful, and want to make even more money, then please follow the links below for our special offer page.
THE SPECIAL OFFER
Watch The Latest John Thomas Webinar Here
Try Global Trading Dispatch (3 month Trial)
Order Global Trading Dispatch Here (1 year subscription)
ABOUT THE AUTHOR
The Diary of a Mad Hedge Fund Trader is written by John Thomas, one of the founding fathers of the modern hedge fund industry.
Seeing the incredible inefficiencies and severe mis-pricing offered by the popping of multiple bubbles during the Great Crash of 2008, and missing the adrenaline of the marketplace, he returned to active hedge fund management. With The Diary of a Mad Hedge Fund Trader, his goal is to broaden public understanding of the techniques and strategies employed by the most successful hedge funds so that they may more profitably manage their own money.
John graduated from the University of California at Los Angeles (UCLA) with a degree in biochemistry and a minor in mathematics in 1974. He moved to Tokyo, Japan to join a Japanese securities house as a research analyst, becoming fluent in Japanese. In 1976 he was appointed the Tokyo correspondent for The Economist magazine and the Financial Times. For the next seven years he published thousands of articles about the economies, companies, and leaders of Asia. He was one of the first American correspondents to cover China during the Cultural Revolution.