Hedgy Risk Management

Hedgy Risk Management

Was founded by Keith McCullough

“A national debt, if it is not excessive, will be to us a national blessing.”
– Alexander Hamilton

Like Keith, I’m a born and bred Canadian.  Despite my nationality of birth, after living in the United States for upwards of the last fifteen years, I can quite confidently say this is a great country.   At Hedgeye, we spend a lot of time critiquing the political leadership in Washington, DC in our research, but that shouldn’t be confused with a general critique of the United States. I’ll say it again, this is a great country.

In 1999, the 106th Congress passed a bill that allocated federal funds to renovate the Hamilton Grange, which was Alexander Hamilton’s family home.  In that bill, Congress indicated that this preservation was to “honor the man who more than any other designed the Government of the United States.”  At times, we’ve sided more with the Jeffersonian philosophy as it relates to governing, but there is no disputing Hamilton’s influence on the founding of this nation.  Indeed, as the first Secretary of the Treasury, his words continue to have relevance in fiscal and monetary policy discussions.

Setting aside the discussion of the extent to which the government should be involved in our lives, I think we would all agree that government does have its place and can, with the right leadership, do great things.  In fact, to Hamilton’s point, based on a government’s ability to tax and borrow (if done prudently these don’t have to be bad words!) it can build infrastructure and provide appropriate social services, which make the outcome of any government debt a “national blessing.” That is, if its use is not “excessive”.

Late last week in our Q2 quarterly theme call, we called for a potential crash in the U.S. dollar.  Once again, we didn’t make this call because we lack American patriotism, but rather because of the fundamentals.  Stepping back for a second, though, we should frame up what exactly a crash means for a currency.

In the last 30 years, the largest annual decline in the U.S. dollar index was -18.5% in 1985, while the average decline for that period was 0.11%.  In the year-to-date, the U.S. dollar index is down -6.6%.  So, we are four months into 2011 and the U.S. dollar is already down close to 1/3  of its largest annual decline ever.  Our view is that the U.S. dollar could decline potentially another -5% through the course of the quarter and roughly -10%-ish through the course of the rest of the year.  If this occurs, it would be the largest annual decline for the U.S. dollar index in 30-years and that, my friends, is a crash. Similiar to a crash that you see in a lot of penny stocks.

This morning, we are seeing a continuation of this move with many currencies, once again, trading up close to a percent versus the dollar.  Interestingly, even in Europe, where sovereign debt woes continue to accelerate, the currencies are strong this morning with the British Pound up +0.92% versus U.S. dollar and the Euro up +0.73%.

We certainly get that being bearish on the U.S. dollar at this point isn’t exactly a contrarian call, but, to be fair, we’ve traded the U.S. dollar in the Virtual Portfolio 20 times since the firm’s inception and have been right 20 times. In addition, of the 46 currency positions we’ve taken in the Virtual Portfolio over the same duration, we booked again on 41 of them. Clearly, this isn’t our first Currency Rodeo. That said, according to a recent survey by Bank of America, all but 6% of their global clients are bearish on the U.S. dollar, which is not inconsistent with some of our internal surveys.  In addition, Barclays reported the commodity assets under management have reached an all-time high at $412BN.

Being long commodities is in many respects the same trade as being short the U.S. dollar, and we’d be remiss to not at least factor into our models that the investment community is leaning hard in one direction.  But the question remains: is consensus bearish enough on the dollar?  Our answer on this, until the facts change, is “no”.

As we analyze the U.S. dollar versus global currencies, we focus on three key factors: debt, deficit, and interest rates.  Currently, the U.S. dollar lines up negative on all three of these fronts, specifically:

1.  Excessive debt – In the last couple of years, it has become cool to quote Reinhart and Rogoff and bandy about sovereign debt-to-GDP ratios, so this isn’t new, but according to usdebtclock.org, the United States has a debt-to-GDP ratio of 96%.  This is negative for GDP growth, which is negative for the U.S. dollar as slower growth leads to longer-term accommodative monetary policy and higher than expected fiscal deficits.  Further, the United States’ future debt trajectory is much steeper than any of its “AAA” peers (Canada, United Kingdom, Germany, and France) due to a lack of a credible deficit reduction plan.  To add insult to injury, the politicians in Washington will once again debate increasing  the debt ceiling in mid-May while global currency traders watch real-time;

2.  Long-term deficit – This year the United States federal government will run a deficit north of $1.5 trillion dollars, which is more than 10% of GDP.  (This is slightly better than Sierra Leone.)  The real issue with the deficit is a lack of a credible plan to reduce the deficit going forward.  While many nations globally have already begun austerity programs, the United States has no plan and the recently approved $38 billion spending reduction for the duration of this year is only likely to have a real benefit of some $380 million.  President Obama has given June as the time frame by which he hopes to have an agreement on a long-term budget, but our view is that based on how far apart the Democrats and Republicans are on the tenets of the plan, this time frame will be blown threw;

3.  Monetary policy bifurcation – Simply put, interest rates and perceived future interest rates move currencies.   Almost every major modern nation in the world has either tightened policy (witness Sweden and China most recently) or is reporting data that suggests tightening is imminent.  In contrast, not only is the United States still implementing Quantitative Guessing Part II, but recent signals out of the Federal Reserve suggest we could see a version of QE-lite after June, so we think the U.S. Dollar will fall victim to additional easing in the face of the world tightening.

In order to shift our investment view on the U.S. Dollar, we need to believe that these factors will improve absolutely and relatively and, as of yet, it is hard to make that case.  Meanwhile, the U.S. dollar index continues to be in a bear market in our quantitative models.

Currently, in the Virtual Portfolio we are long the Canadian dollar, long the Chinese Yuan, and long the British Pound. We covered our short position in the U.S. dollar (UUP) yesterday.   This isn’t about politics or patriotism, but risk management.

Enjoy the long weekend with your families.

Keep our head up and stick on the ice,

Daryl G. Jones
Managing Director

Investing In Penny Stocks – How To Buy Penny Stocks Online

Investing In Penny Stocks – How To Buy Penny Stocks Online

When you decide to buy penny stocks to add to your investment portfolio, or maybe just when you’re starting out you have made a big decision. Penny stocks are good investments only when you know how to buy, choose and profit from them.

How To Buy

When buying these stocks, your best choice will have to be choosing an online discount broker to save on hefty commissions associated with traditional stockbrokers.  In addition, it pays to have a company that specializes in penny stocks to handle your trades, if only for the focused expertise provided to your investments.

You will be required to deposit the money necessary to buy the stocks of your choice.  Don’t worry as you can start with as little as a few hundred dollars in initial investment capital.

When you have deposited the money via personal check, bank transfers or wire transfers, you can now click away on the “Buy” button.  The simpler part is in clicking the mouse while the hardest is in choosing the penny stocks to choose.

How To Choose

Speaking of choosing penny stocks, you must have an investment plan. As always, keeping up with the Joneses may not be a good idea as your investment plan must be aligned with your goals.  With that said, you must choose the penny stocks that fit your criteria for a good investment. For example, if you are a day trader, you will want to buy penny stocks that can be easily bought and sold within the day for a tidy profit.

Also, you must put your nose to the grindstone by researching as much as you possibly can about the company offering the stocks and the movement of the penny stocks themselves.This way, you can apply analytical tools and processes to determine which stocks are probably the most profitable.  And did we mention that it pays big time to stay on top of industry developments? It most definitely does.

How To Profit

Life as a penny stock investor will be so much simpler if only choosing to buy these stocks the right way is all there is to earn profits. However, life is not that kind, especially where money is concerned.  Fortunately, there are some things you can do to increase your chances of earning consistent profits.  First, invest in what you can manage to lose without drastically and adversely affect your investment portfolio.  Keep in mind that investing in these stocks is the most speculative investments and as such you have to balance the need to profit and the inevitability of losing money.

Second, and it cannot be emphasized enough, you must stick to your investment plan.  If it says that $100 in profits and $50 in losses, whichever comes first, each day is the limit, then walk away from the trading floor when these caps have been reached.

When you buy penny stocks, you must carefully think through your decisions before, during and after this activity to ensure that profits are maximized and losses are minimized.

 

Buying small-cap stocks

Buying small cap stocks

Buying and selling small-cap stocks is one of the most rewarding kinds of investment available today. There isn’t any boundary for the money you can make. In a single day, the price of small cap stocks could be doubled, tripled or maybe quadrupled. That’s the reason why you generally notice many guys started nothing to very rich men very fast.

Nevertheless, trading penny stock can be very risky in the case you are a newcomer to this type of investment. I have seen not fewer people went broke since they could not understand fully the principles of the game. What they did were purchasing cheap stocks, followed the suggestions of friends, family members or even several so-called “gurus”. Due to the huge profit of penny stocks, there are numerous people; companies are applying techniques to manipulate the prices. For anyone who is not watchful enough, you certainly will easily fall into the hype and also lose money really, really fast.

Consequently, the key point when you buy and sell penny stock is finding the Genuine one to invest in. The stocks have a low price, a high potential which ensures you have huge profits. penny stocks on Robinhood This particular task is absolutely hard when you do not be aware of the key of penny stocks. Once you know the method, choosing a profitable penny stock can be extremely simple.

If you want to earn huge revenue trading small cap stocks, You should have a look at Penny Stock Prophet. This system will show you the way to pick the winning penny stocks to make huge income from it. You don’t want to miss the chance to become the future one night millionaire.

 

 

What Are Penny Stocks To Watch? – Penny Stocks to Watch | Penny Stocks

Probably, anybody who has even an interest in investment might have dreamed about searching for one stock which shall turn out to be the next Google or Intel.As a result, the desire to become one of the lucky people who are able to make a fortune on the stock market tends to be the root of someone’s fascination for the low-priced securities, known as penny stocks. The questions here are: What exactly are they? What are their primary features? What are the pros as well as cons of investing in these ones?


So, What Are Penny Stocks?


In fact, there seem to be different definitions of the term “penny stocks.” Several individuals only apply the name “penny stocks” to the stocks priced at less than $1 per share. However, according to The Securities and Exchange Commission (SEC), a penny stock is often issued by a small firm as well as priced at less than $5 per share, basically with low liquidity (limited trading volume). In the United Kingdom, one penny stock is defined as a one that costs under £1 per share, and usually owns a total market capitalization under 100 million pounds.


How About The Function Of Penny Stocks?


Worthily, penny stocks are high-risk and speculative investments.

Penny Stocks

Due to the possibility of the high returns, they are really attractive to lots of  investors. Truly, there will be some validity to that. Eventually, giants like Microsoft Corporation begun their business door as the small companies. Dozens of penny stocks tend to be the new firms, and some shall do well.


Nevertheless, the failure rate can be high, and once the company goes out of business, many penny stocks can eventually become worthless. Those stocks often appeal to speculators; thus, sudden surges in volume are able to result in the large price changes, which provide them with a tendency to be volatile.


Hot Penny Stocks To Watch Now!


While seeking the best ones to invest in, we are required to look up a lot of the financial news, and then view more and more different economic news all the time because penny stock markets tend to be strongly influenced by all of the market motions.On a regular basis, penny stock market costs will be exactly governed as per the demand and provide analysis of shares.

Stocks

One of the potential sectors, which should be greatly considered, is crude oil. Why? The reasons here are that the dollar is considerably weakening in the international market, while the BRIC economics have the incredible rise in the demand of crude oil. The truth is that inflating oil prices will lead towards a different market behavior in the forthcoming years, and the fluctuations may be capitalized upon. Hence, Oilsands Quest and other oil companies will be smart options to invest.


Furthermore, penny stocks from software sectors can not boom. Nonetheless, from the point of view of the long-term investment, we are able to invest in the same. Don’t forget that surgery, medical, and other allied sectors tend to be expected to go really high. In addition to this, media services, the automotive sector, banking and finance shall also gain really considerably.


Please ensure that we analyze the whole market, and then divide our investment into parts whereas keeping a tab on the competitors. For ease, we are also able to invest in the handful companies. Bear in mind that penny stocks are not similar to any common stock. For this reason, we’re encouraged to consult the advice from those who engage in penny stock trading to get an excellent perspective.


Freely display your concerns about the article “What Are Penny Stocks To Watch?” by submitting them below.


 


My Writer name is Hanh Nguyen. I studied at Industrial University of Ho Chi Minh City. During study, my major specialized in Commercial English, and my study focused on Finance. After gaining B.A., I started to become a proficient Content Writer in the field of Economics and Finance till now!