Über die Autorin bzw. den Autor

Jason Schwarz is the options strategist forLone Peak Asset Management (LPAM), aregistered investment advisory firm located inWestlake Village, CA. Specializing in optionLEAPS, he played a key role in helpingLPAM’s clients manage their way through the2008 downturn. His articles have appeared onthe Web sites Seeking Alpha, Yahoo! Finance,Stock House, and Mac Daily News, and hisexpertise has earned him multiple appearanceson the Fox Business News Network and BusinessNews Network in Canada.

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THE ALPHA HUNTER

The McGraw-Hill Companies, Inc.

Contents

Chapter One

In August 2008, the global spotlight was shining on the New Wall Street as never before, not least because the price of a barrel of oil was galloping up to its peak of $147. At the time, I wrote an article for the Seeking Alpha Web site in which I predicted that not only would this commodity run not last but also that oil was in for a gigantic drop in price: it would return not to $100 a barrel, but to its historic norm of $30 to $50 a barrel, and it would get there within a year.

That was a forecast that got people talking. My article was the most popular on Seeking Alpha for at least three weeks, and soon it was circulating through China, Russia, and the Middle East. The major television networks took notice, and they invited me on for interviews in which I discussed my thesis. In an age when it's increasingly hard to make one's voice heard above the collective, daily roar of the mass media, I'd had a breakthrough.

But as I did my tour of the television studios, it was obvious that my newfound popularity wasn't based on respect for my prediction; if anything, it was considered so outrageous as to provide good entertainment. I could see that my interviewers didn't agree with me and perhaps didn't even take me seriously.

And why should they? The experts in the field—billionaire oilman T. Boone Pickens, the legendary Goldman Sachs investment firm, to name a couple—were predicting that oil was going to keep going up, perhaps to $200 a barrel. History had become an unreliable guideline; high oil was the new norm. Who was I to suggest otherwise?

Well, I was an analyst coming from another perspective, an outsider's perspective. Most analysts, such as Pickens and Goldman Sachs, have conflicts of interest. Much of Pickens' vast fortune was invested in oil and alternative energy.

Goldman Sachs was generating huge returns in its commodity trading department. These were players positioned to clean up should the price of oil continue its upward march. How did that affect their judgment?

Months later, in January 2009, hedge fund manager Michael Masters commented on the unusual oil speculation activity in a 60 Minutes Special Report. "So you had the largest price increase in history during a time when actual demand was going down and actual supply was going up during the same period," he said. He concluded that the only sensible explanation for the jump in price "was investor demand."

Masters believed that investor demand for commodities, and oil futures in particular, was created on Wall Street by hedge funds and the big investment banks, such as Morgan Stanley, Goldman Sachs, Barclays, and J.P. Morgan, which made billions investing their clients' money. "The investment banks facilitated it," Masters said. "You know, they found folks to write papers espousing the benefits of investing in commodities. And then they promoted commodities as a, quote-unquote, 'asset class.' Like, you could invest in commodities just like you could in stocks or bonds or anything else, like they were suitable for long-term investment."

In the summer of 2008, contagious momentum had infected the commodities market and created an overreaction that reached bubble proportions and spread across the spectrum of analysts and commentators. Once you're inside a bubble, it is easy to lose sight of the big picture. That's why no one in the financial media agreed with me. And it wasn't just them; even my own family and friends thought that my oil call was crazy.

But you know how the story ends. Within a few short, wild months, crude was at $30 a barrel.

That was my first chance to play out a David and Goliath scenario with traditional Wall Street. Then, in March 2009, I spelled out a thesis on TheStreet.com in which I argued that financial stocks were ready to rally off of the bottom. The primary article, titled "Bank of America Is Going Back to $20," was published the day Bank of America hit its low of $2.53.

Again, it was the right time to make the prediction, as long as I didn't mind being told I was wrong, at best, or judged a fool, at worst. After all, this was the trough of the financial crisis, and the action in the market had never felt more chaotic. But once more I was confident that my investment methods allowed me to see the bigger picture.

Meanwhile, Goldman Sachs issued a research note among investors that explained why they still didn't have any faith in a rally for the financial sector. Banking guru Meredith Whitney, who had become an overnight sensation for correctly forecasting the financial crisis, came out against my call on CNBC; she was also skeptical of the initial relief rally. Back on TheStreet.com, Rev Shark made it a little more personal by describing my bullishness as "damn dangerous."

Lo and behold, that rally wasn't just real; it was a once-in-a-lifetime opportunity that conventional wisdom just couldn't detect. My Bank of America call was subject to as much mockery as the oil call had been six months earlier, but in both cases, Alpha Hunter's David got a notch on his belt, and the traditional Wall Street Goliath took a nice black eye.

We've just discussed two of the most important investment plays of the 2007 to 2009 recession, two that very few got right. This book is going to explain the macroeconomic methodology that will help you identify future golden opportunities and position yourself to see the big picture as the market roils.

Life Outside the Box

Investment conditions on the street have undergone a paradigm shift, yet I don't think the traditionalists have noticed. They're stuck inside a box that was hammered together in the last century, and they are unwilling and unable to accept the new reality. This is especially true as you move up the ranks and into the elite analysts inside the financial institutions and among the media that keep an eye on them; they're used to dominating market perception and being applauded for their insights.

I don't trust anything I hear coming out of that old box. Investment philosophy is in critical need of a comprehensive update, even a total rewrite, and any investor who counts on his or her returns had better get up to speed, with speed. Most books you read won't put it that starkly, but I believe your financial future depends on recognizing that we are at a turning point in history. The courses of global markets are undergoing transformations on a scale that hasn't been seen in 100 years.

Where is the big change? It concerns the variable that was—and remains—the real market mover: confidence. The stock market acts as if the future happened yesterday; its inference of confidence in future fundamentals drives the investment strategies of the present moment.

In the twenty-first century, as digital technology pounds the world flatter and flatter, and makes us ever more dependent upon its lightning speed, we are much more susceptible to the contagious consequences of confidence or the lack of it. Worry spreads quicker than it ever did before. Momentum builds up much faster. News flow that is distributed instantaneously around the globe has dramatically enhanced the volatility of confidence.

Former Federal Reserve Chairman Alan Greenspan offered up his own insight into the new Wall Street when he said:

After 9/11, I knew ... that we are living in a new...