Global Trades for Final Quarter of 2012

09/26/2012 4:15 pm EST


Jack Crooks

President, Black Swan Capital LLC

Jack Crooks outlines several areas of global economics that point to several trading ideas for the remainder of 2012.

I’m here with Jack Crooks of Black Swan Capital, and we’re talking today about global macroeconomic issues and how that is going to affect the markets going into the end of 2012.  So, Jack, what do you see here in the global perspective?  I mean, Europe is still on everybody’s mind.

Yeah, I think Europe is one of the situations where a lot of people are excited.  The ECB just came in recently and said we’re going to save the euro, but I see some things going on there that suggests that there may be another crisis.  Even if they save the euro, we see real trouble in Europe that’s going to continue to be a drag on the global economy.  The other area that everybody remembers that hasn’t been in the news as of late is China.  Everybody’s favorite growth area that’s going to pull the world and pull the wagon, so to speak.  China is in really big trouble.  Their whole growth model looks like it’s in trouble.  Their export dominated growth model, their investment model to try and keep jobs in the economy.  We see hot money flowing out of China.  So we see real problems for China in terms of not only just a slowdown, but a structural change that they’re going to need to make in their whole growth model.

How about the Middle East?  We’ve seen this has been in the news just recently with a lot of uprisings and a lot of anti-American sentiment.  Do you think that ultimately will affect our economy as well?

Yeah, I think it does in that, you know, it just kind of changes the focus a bit.  It takes politics and their eye off of the ball and a little bit off of the economy.  They have to worry about foreign policy.  It is pretty critical and it adds volatility to the markets, especially the commodities markets and that flows through to everything—oil, needless to say—so it’s definitely something to watch. 

And how about Iran?  I mean, we haven’t heard about that recently because other countries have been in the news, but that’s still an issue.

Yeah, it is an issue.  Obviously, there is a big fight between Israel and the US.  Will they go in?  Will they let Israel go in?  So that’s kind of a black swan event, so to speak.  We just don’t know there.  You know, ultimately, if nothing happens, it’s a non-event, obviously, because I don’t see Iran funding anything major in here.  There’s enough turmoil going on as it is.

Now, with all of this talk, there is a lot of bad news out there, and yet it doesn’t seem to be affecting our markets right now anyway.  We’ve had a nice jump up here.  Why is that?  Why are we not seeing a more panicked situation in our own markets?

Yeah, I wish I knew the answer to that because based on what’s going on in the global macro environment, assuming that the multi-nationals in the US draw most of their earnings from overseas, you’ve got to look at these stocks and say they’re way ahead of themselves based on future’s earnings, but obviously the Fed.  Nobody is fighting the Fed in here and nobody is fighting the European Central Bank in here and the sentiment is strong with liquidity.  It seems that simple.

Alright, speaking of the Fed, last question.  What about this QE3 that they’re planning on doing now?  Good thing for the markets or a bad thing?

Good things if you like price-led trading.  I think bad thing, ultimately.  There’s going to be payback.  I think when you mess with the monetary system this badly as the Fed has done and create this much liquidity, ultimately, it’s going to come back to bite them at some point.
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