Month: May 2014

Everyone in my business is consumed with beating the market.  What if I told you I knew a sure fire way to beat the market?  It’s simple really.  Buy the SPY, the S&P 500 ETF, on margin.  You’ll beat the market.  You will also lose more on the downside of course.  This helps put it into perspective.  We’ve had a one way game since 2009, now running into one of the steepest and longest bull markets in history.  Perhaps we started from a low base after the crash of 2008.  Perhaps we have benefited from zero interest rate policy of … Read more

The PPI number came in hot.  I expect the CPI number tomorrow, Thursday, to come in blazing hot.  I keep looking for asymmetrical ways to express this view.  In other words, limited downside, significant upside.  The utility stocks are my preferred play although there may be a few others including long gold. Producer prices increased 0.6% in April, up from a 0.5% increase in March. The consensus expected producer prices to increase 0.2%.  Ex-Fed Chairman Alan Greenspan said although he doesn’t see an imminent rise in prices, it’s a mistake to believe that inflation isn’t a threat. Greenspan spoke in Washington … Read more

STAG-FLA-TION with a hot PPI and CPI print this week, talking heads will be all over the return of stagflation. Sub-par economic growth and rising input costs across the board will make for interesting headlines soon.  The stock market doesn’t like stagflation. It’s the worst of all worlds although a little pick-up in inflation will be heralded as a good thing at first.

We are positioned for this trade with shorts on the XLU and put option on it as well as puts on the Vanguard Utility ETF, VPU.  Both of which have made nice runs this year and could pull back some on hotter than expected numbers.  It’s a somewhat asymmetrical trade as their doesn’t seem to be huge risk on the downside and some nice alpha on the upside. May 11, 2014 4:50 p.m. ETThe next small steps up in inflation could set off big tremors in financial markets.The two main U.S. inflation gauges, the Labor Departments consumer-price index and the Commerce … Read more

We wrote in our quarterly letter that we expected inflation to rise more than expected.  The CPI and PPI next week should give the new Fed Chairperson, the chance to exhibit her inflation fighting credentials.  Expect some tougher talk of the bond vigilantes and a sharp downward reaction to interest rate sensitive utility stocks.  Our next largest position after our long Apple stakes is a short position on the XLU.    May 4, 2014 7:42 p.m. ETT The improving U.S. jobs market is impaired by stubborn, slow growth in wages, but recent results from companies show the outlook for some workers may be brightening. WSJs … Read more

We mentioned in our quarterly letter than we had picked up small stakes in handful of beaten down biotech stocks that insiders were buying.  One of those was Merrimack, the largest percentage gainer in the market. We have been following Merrimack pharmaceuticals for a few months now. The cluster buying from insiders caught our eye at the end of last year. They have multiple trial drug categories; their most promising is a pancreatic cancer drug in the final trial stage. Results of this trial were to be finalized and released in the 2nd quarter of 2014. Today, with the news … Read more