Skip to main content

Investor Advice


Dear Friends:

I would like to add some thoughts to the conversations we have had over the last weeks about the wild markets.


1. If you were to ask me for my personal opinion this is it: I don't know if Friday was the bottom but there is a good chance it was and I think the market could go back to 10,000 in a flash. Take a look at JNJ below, which is typical of the blue chips classic charting bottom during Friday's whipsaw. These kinds of bargains will not last for long, and once we have bottomed these falsely low prices will be replaced by a strong recovery.





2. For me, the idea that we would go into a steep economic decline is just not valid. As a student of economics what I have witnessed is a classic market panic, a once in generation kind of thing and something that tends to come back quickly once confidence is restored. Panics do have roots in real things; here the de-leveraging of banks bloated and risky balance sheets, but for me, their losses are just the retaking of their false profits. Using the example of JNJ above, major blue chips like this actually spent the last few years raising cash and buying back shares?the exact opposite of what the financial firms and hedge funds did. So JNJ has about 10B in cash and over 40B in equity with little debt.


3. I like what the Treasury has proposed: instead of using the 700B to just buy and prop up troubled assets, they will instead use this to buy into and re-equitize the banking system. Together with taking interest rates to near zero, this will have a bank capital ratio multiplier effect that turns the 700B into a far greater and perhaps multi-trillion dollar credit rebound.


4. In times like this our Financial 911 Americans are responding by pulling together. This is refreshing after years of credit greed and overspending by bankers, hedge fund managers, and petro-billionaires. This spirit was evident Friday when wild cheers erupted on the trading floor when the market finally surged off its lows. And to fully energize Americans for a quick recovery, three weeks from now I believe the right man for our times will be elected president in a Reagan style landslide with a recovery mandate.


I have attached a synopsis of my last live Bloomberg Television report, where along with describing the extraordinary trading conditions, I called for a rally of a least 1000 points! And finally, again I will be talking with each of you as we look for opportunities to strengthen and to capitalize on the inevitable rebound in the markets.

Yours truly,

Matt Shapiro


Matthew Shapiro
President

MWS Capital LLC 6501 N Bosworth 1C Chicago, IL 60626
tel: 773.412.4302

Comments

Popular posts from this blog

FED Rate Hikes Could Cause Unintended Volatility Shock

Last week the Federal Open Market Committee surprised no one when they raised rates 0.25 basis points to increase rates to between 1% and 1.25%.  What did surprise the market, was the revelation that the FED is committed to normalize rates, even if inflation does not meet their target.  This was reiterated this week in a speech by William Dudley, President of the Federal Reserve Bank of New York, who stated he feels the FED needs to raise rates, despite low inflation, to be ready to act if the economy does slow down.
The market has been quick to respond, and nothing was hit harder by a reduction in inflation expectations than commodities.  Gold, since the announcement, is lower by 2.39%, and oil is down -3.18%.  Crude futures have broken their upward trend line and appear poised to test the previous low of $39.56.
While, oil has been under pressure all year, the S&P 500 does not seem to care, as it continues to make all-time highs.  Oil is down 23% year to date, while the S&P…

Gold and Treasuries Say “RISK OFF”, But VIX Says "RISK ON"

Today we are seeing a modest rebound in the market after yesterday’s small selloff.  Volatility remains extremely low, with the VIX hovering around 10.  It’s important for traders to recognize how low the VIX has been lately.  Since 2010, the VIX has only closed below 10 five times, and each of those five times has come in the last month.                   However, the market is not without risks right now.  Gold has rallied 6.5% since May 9th.  Treasuries have rallied, pushing rates to below 2.15.  So, the market is currently in a risk off mode while equities are in a period of historically low risk.  The VVIX (the VIX of the VIX), for its part, is not sounding the all clear signal, 87 is in the medium range for VIX volatility.  Tomorrow we have a potential market moving event with James Comey’s testimony to Congress.  The last time Comey’s name was in the news, we saw the VIX move from 10.5 to over 15 in one trading day (a 50% increase) on a day where the market was down over 2%.  …

Markets Soft without Stimulus

Markets around the world pulled back the reigns as central banks look to taper quantitative easing. Japan’s central bank decided to leave their current pace of monetary policy unchecked, which has effectively cut the Nikkei down 1.5% on the day, affecting nearly every market in-between, scaring the DJIA 165 points off the start this morning. US Treasuries have now notched the highest yield in 14 months on the 10 year note.

This morning 55,257 EEM July 35 puts were purchased by a trader for $0.29 each, costing him a large $1,602,453. This is a bearish move on the Emerging Markets ETF, with expectations that by the July expiration, the price of EEM will dip below $34.71. EEM opened today at $39.32 and if this trader was to pass the breakeven point, the ETF would have to drop by more than 11.7% within a little over a month.

EEM opened today 1.9% lower than its closing price yesterday and since the 52-week high the ETF experienced in early January, it has lowered by over 13%. While this …