As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
Global Market Comments
March 21, 2013
Fiat Lux
Featured Trade:
(TRADE ALERT SERVICE SEIZES 31.8% GAIN IN 2013),
(SPY), (FXY), (IWM, (BAC), (AIG), (FCX),
(FXE), (FXB), (GLD), (USO),
(THE BULL CASE FOR BANK OF AMERICA), (BAC),
(WHEN STERILIZATION IS NOT A FORM OF BIRTH CONTROL), (TLT), (PCY), (MUB), (JNK),
(TESTIMONIAL)
SPDR S&P 500 (SPY)
CurrencyShares Japanese Yen Trust (FXY)
iShares Russell 2000 Index (IWM)
Bank of America Corporation (BAC)
American International Group, Inc. (AIG)
Freeport-McMoRan Copper & Gold Inc. (FCX)
CurrencyShares Euro Trust (FXE)
CurrencyShares British Pound Sterling Tr (FXB)
SPDR Gold Shares (GLD)
United States Oil (USO)
iShares Barclays 20+ Year Treas Bond (TLT)
PowerShares Emerging Mkts Sovereign Debt (PCY)
iShares S&P National AMT-Free Muni Bd (MUB)
SPDR Barclays High Yield Bond (JNK)
The Trade Alert Service of the Mad Hedge Fund Trader has posted a 31.8% profit year to date, taking it to another new all time high. The 27-month total return has punched through to an awesome 86.9%, compared to a miserable 18.5% return for the Dow average during the same period. That raises the average annualized return for the service to 36.5%, elevating it to the pinnacle of hedge fund ranks.
My bet that the stock markets would continue to grind up to new all time highs in the face of complete disbelief and multiple international shocks paid off big time, as I continued to run long positions in the S&P 500 and Bank of America (BAC).
My substantial short volatility positions are contributing to profits daily, with the closely watched (VIX) Index plummeting to a new five year low at 11.5%. I booked nice profits from holdings in American International Group (AIG) and copper producer, Freeport McMoRan (FCX), and the Russell 2000 (IWM). I also prudently doubled up my short positions in the Japanese yen for the third time this year.
It has truly been a month where everything is working. Even my short positions in deep out-of-the-money calls on the (SPY) are breaking even. While the (SPY) has been going up like clockwork, it has not been appreciated fast enough to hurt the position.
Trade Alerts that I wrote up, but never sent, worked. That?s because I have been 100% invested for the entire year in long stock/short positions. However, followers of my biweekly strategy webinars caught my drift and benefited from the thinking, and many did these trades on their own. These included shorts in the Treasury bond market, (TLT), the Euro (FXE), (EUO), and the British pound (FXB).
Sometimes the best trades are the ones you don?t do. I have been able to dodge the bullets that have been killing off other hedge funds, including those in gold (GLD), oil (USO), and commodities (CORN), (CU).
All told, the last 24 consecutive recommendations of the Trade Alert Service have been profitable. I have two trades to go to beat this record. Watch this space.
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service, daily newsletter, real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
I?ll give you the quick and dirty argument behind buying Bank of America. For the past four years, the main argument for avoiding this stock like the plague was the hidden book of bad home loans it was hiding on its back bookshelf, thought to be in the tens of billions of dollars. This is why the shares spent most of the last half decade trading at a pitiful 50% of its book value. Nobody believed what management was representing as its true value.
Throw a sustainable recovery in the real estate market into the mix, and that excuse goes out the window. Rising property values means better quality collateral for the bank and more credible asset value representations. This will encourage equity investors to pay up to book value, 60% higher than price to book of 63%, and possibly more. That gets you at least to $20/share right there.
Do any search on (BAC), and a vast outpouring of contentions litigation, regulatory transgressions, and fines will pour out. Wherever there has been trouble in the financial system for the past decade, Bank of America was there, and up to its neck. The key point is that these are all in the past, settled, and accounted for in the future earnings stream.
Some of the acquisitions that (BAC) made during the crash were horrendous in their timing. It never missed an opportunity to overpay. The $2 billion Countrywide Financial acquisition stands out for its stupidity, which ate up masses of management time. Merrill Lynch at $50 billion? You must be joking. At that price, I have a pretty orange bridge here in San Francisco I?d like to sell them, as well. This was when a charitable valuation for the old raging bull would have been zero. Add 130% to the Dow average and it is a different story. The booming stock market has enabled Merrill?s profits to surge, and (BAC) could probably flip it here for a tidy profit.
After winding down positions in financials for five years, many long-term institutional investors are now running generational lows in this unloved sector. Return to market weightings could take years. Sure, we have already covered some serious ground with (BAC), from $5 to $12.75. I think the stock could make it up to $20 this year, and $30 eventually. Trend reversals like this go on for years. Looks like Warren Buffet got the bottom at $5, again!
Finally, (BAC), along with the entire banking industry, is perfectly positioned to profit from rising interest rates. Steep yield curves are where banks traditionally make their bread and butter, through borrowing short and lending long. The collapse of the Treasury bond market (TLT) may not be imminent, but it is coming. Think of (BAC) as an undated put on Treasury market.
This particular option spread, the $11-$12 in April is attractive because the upper strike matches the old upside breakout level on the charts. This should provide ample support during the inevitable correction. The April expiration is only 22 trading days away.
I received a flurry of inquires the other day when Ben Bernanke mentioned the word ?sterilization? in his recent congressional testimony. And he wasn?t giving advice to the country?s wayward teenaged girls, either.
Sterilization refers to a specific style of monetary policy. Sterilized policies seek to manipulate the money markets without changing the overall money supply. The Fed implemented just such a strategy in 2011 when they initiated their ?twist? policy. This involved buying 10, 20, and 30 Treasury bonds and selling short an equal amount of short-term Treasury bills.
The goal here was to force investors out of the safety of Treasury bonds and into riskier assets like stocks, commodities, and real estate. Given the market action since then, I?d say they succeeded wildly beyond their dreams.
Dollar for dollar there is no change in the Fed?s balance sheet when sterilized actions are undertaken, although there is a huge increase in the risk profile of their portfolio. A private institution would be insane to do this at this stage of the economic cycle, as the risk of capital loss is great. But governments are exempt from mark to market rules and can carry this paper at cost or par, whatever they want. That?s why we have a central bank.
The Fed is now running up against a unique problem. The twist program is so large that it is literally running out of short-term securities to sell. When this happens, they may well resort to 28-day repurchase agreements instead, which are essentially sales of short term paper out the back door. This is what Uncle Ben was attempting to explain to our congressional leaders, which I?m sure went straight over their heads.
The really interesting thing here is why Bernanke is suddenly interested in sterilization? These are the types of policies you pursue to head off inflation. With wages continuing to fall, it is difficult to see why this should be an issue.
Maybe he?s looking at the price of homes and the stock market instead, which have recently been going through the roof. Perhaps he?s looking several years down the road. The great challenge for the Federal Reserve from here will be unwinding their massive $3.5 trillion balance sheet it built up during the Great Recession, without triggering runaway price increases.
For an excellent explanation of the history of monetary sterilization, please click here at http://en.wikipedia.org/wiki/Sterilization_(economics).
No, Not This One
I think the letter is getting better because it's progressing ever more towards a true mentoring program in that you share your rationale and backup data for the trades you recommend.? I really appreciate it when you include "the bet is . . ." in the Trade Alerts which explains what you think will transpire going forward.
I've always appreciated your ability to synthesize world events to make money especially since you seem to be able to do it with humor and lightness.? I always chuckle when you do the "da, da, da, . . ." in the webinars.? How you remain calm during technological meltdowns is impressive.? I appreciate the service and your life perspective.
I'm looking forward to talking with you at the SF Luncheon on April 12th.
Kathy
San Francisco
?Our clients used to think in weeks and days. Today, it?s not even hours-- they think in minutes,? said John Schutz of Wells Fargo, the largest financial advisor in Minnesota, with $1.2 billion in assets.
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. Read more
As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen. Read more
Global Market Comments
March 20, 2013
Fiat Lux
Featured Trade:
(THE RECEPTIONS THE STARS FELL UPON),
(NLR), (CCJ), (CORN), (WEAT), (SOYB), (DBA),
(BECOME MY FACEBOOK FRIEND),
(OIL ISN?T WHAT IT USED TO BE), (USO), (DIG), (DUG)
Market Vectors Uranium+Nuclear Enrgy ETF (NLR)
Cameco Corporation (CCJ)
Teucrium Corn (CORN)
Teucrium Wheat (WEAT)
Teucrium Soybean (SOYB)
PowerShares DB Agriculture (DBA)
United States Oil (USO)
ProShares Ultra Oil & Gas (DIG)
ProShares UltraShort Oil & Gas (DUG)
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