November 2013

Mad Hedge Fund Trader Melts Up to 56.4% 2013 Performance

I sit here painfully typing this letter, as my fingertips have been worn down to bloody stumps. I have been pounding out the Trade Alerts since the month started, sending out 37, and the month is only half over. That works out to a 3.3636 Trade Alerts a day!

I have been so busy that I literally haven?t had time to eat, living entirely on black coffee, and losing three pounds since November 1. Maybe I should go into the weight loss business. I hear it?s more profitable than this financial stuff.

Not only have I worked myself to the bone, my staff is rapidly wearing out as well. Everyone is taking a well-earned rest this weekend, melting a few ice cubes along the way.

Still, you don?t get market melt ups like this very often in life. You have to strike while the iron is hot, make hay while the sun shines, and carpe diem. Usually I warn investors that if they ?invest in haste, they will repent at leisure.? In this market it?s the opposite. Invest at leisure, repent with haste.

Still, it?s all worth it when it?s working. Including both open and closed trades, the last 18 consecutive Trade Alerts have been profitable. I am rapidly closing in on an old record of 25 successful Trade Alerts, made earlier this year.

The Global Trading Dispatch service of the Mad Hedge Fund Trader is now up 56.4% in 2013. The November month to date record is now an enviable 11.92%.

The three-year return is an eye popping 111.43%, compared to a far more modest increase for the Dow Average during the same period of only 30%.
That brings my averaged annualized return up to 38.2%.

This has been the profit since my groundbreaking trade mentoring service was launched 35 months ago. These numbers place me at the absolute pinnacle of all hedge fund managers, where the year to date gains have been a far more pedestrian 3%. I predict the arrival of a lot more job seekers on Craig?s List in January.

I took profits on all of my extensive shorts in the Treasury bond market, taking advantage of the sudden back up in ten-year yields from 2.47% to 2.77%, the sharpest move of the year. I then reloaded on the first 9 basis point back up in yields

I then bet that the stock market would continue another tedious sideways correction going into the Thanksgiving holidays. I bought an in the money put spread on the S&P 500, and then bracketed the index through buying an in the money call spread. Both of these expired profitably on Friday.

I then took advantage of the weakness to add another long in the Industrials ETF (XLI), a rifle short at one of the best performing sectors of the market. I piled on more shorts in the Japanese yen (FXY), (YCS), believing that the Bank of Japan will have to accelerate its monetary easing program to deal with an economic slowdown. I also caught the China recovery play by going long the Australian dollar (FXA).

This is how the pros do it, and you can too, if you wish.

Carving out the 2013 trades alone, 74 out of 89 have made money, a success rate of 83%. It is a track record that most big hedge funds would kill for.

My esteemed colleague, Mad Day Trader Jim Parker, has also been coining it. He caught a spike up in the volatility index (VIX) by both lapels. He also was a major player on the short side in bonds, to the delight of his many followers.

The coming winter promises to deliver a harvest of new trading opportunities. The big driver will be a global synchronized recovery that promises to drive markets into the stratosphere in 2014. The Trade Alerts should be coming hot and heavy. Please join me on the gravy train.

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 and my daily newsletter, the Diary of a Mad Hedge Fund Trader. You also get a real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. Upgrade to Mad Hedge Fund Trader PRO and you will also receive Jim Parker?s Mad Day Trader service.

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.

November 20, 2013 - MDT - Midday Missive

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

November 20, 2013 - MDT Pro Tips A.M.

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.

November 20, 2013

Diary, Newsletter, Summary

Global Market Comments
November 20, 2013
Fiat Lux

Featured Trade:
(THE MARKET TAKES A BREAK),
(SPY), (IWM), (FXY), (AAPL), (C), (TLT),
(RINGING THE REGISTER WITH THE AUSSIE),
(FXA), (EWA), (FXI),
(THE MYSTERY OF THE BRASHER DOUBLOON)

SPDR S&P 500 (SPY)
iShares Russell 2000 (IWM)
CurrencyShares Japanese Yen Trust (FXY)
Apple Inc. (AAPL)
Citigroup, Inc. (C)
iShares 20+ Year Treasury Bond (TLT)
CurrencyShares Australian Dollar Trust (FXA)
iShares MSCI Australia (EWA)
iShares China Large-Cap (FXI)

The Market Takes a Break

Newsletter

I often use my own profit and loss statement as a leading market indicator. Whenever I am blessed with a windfall profit, it is frequently time to sell. On those rare occasions when I take a big hit, it is invariably time to buy.

This is one of those times.

Since November 1, the Trade Alert service of the Mad Hedge Fund Trader has earned a white-hot 12.12%, taking my year to date return up to 56.62%. The last 19 consecutive Trade Alerts have been profitable.

Performance bursts like this occur, not because I have suddenly gotten a lot smarter. If anything, my advanced age assures that I am headed in the opposite direction on that front. It is far more likely that upward spikes in my P&L happen because the market is getting overheated, at least for the short term.

So I think that it is time to take my foot off the accelerator, cut back and neutralize my model trading portfolio, and sit down and smell the turkey. In any case, with 43 Trade Alerts going out this month, I am running the risk of overtrading.

It is very impressive to see how fast the options markets are crushing implied volatility. This means the market doesn?t think much is going to happen over the next few weeks. The stock market has been up for the last seven weeks in a row, a rare event. Portfolio managers are bathing in once unimagined riches and have visions of bonus checks dancing in their eyes.

This is all a nice set up for 3%-4% Thanksgiving mini correction. The market is now wildly overbought on a short-term basis, and I can?t be the only one exhausted from the sheer volume and intensity of the recent market action.

That is why I knocked out two short positions today in the form of the SPDR S&P 500 (SPY) December, 2013 $183-$186 bear put spread and a the Russell 2000 iShares (IWM) December $113-$116 bear put spread. It?s not a huge bearish bet, just a modest one. And these both take advantage of the fact that market volatility will probably die a slow death going into the holidays.

I am going to hang on to my other long positions, since they are so far in the money that the safety cushion to my breakeven point is large.

Apple (AAPL) is moving into its peak earnings period. Citibank (C) is surfing the wave of money pouring into long neglected financials. Ditto for the Industrials ETF (XLI). The Japanese yen (FXY) will probably break to new lows for the year in coming weeks, so I am looking to add on any strength. Bonds (TLT) are trading like the life has been sucked out of them, so the short side is the correct posture there.

Whatever pause in the market action we get will be a brief one. Take a look at the chart below put together by my friends at Business Insider. Despite all the bubble talk by the clueless media, we are in fact still at the bottom of the range for the S&P 500 forward 12-month PE ratios for the past 15 years.

Assume that corporate earnings rise 10% a year for the next four years. Then assume that earnings multiples also rise by 10% a year, taking us back up to the 22 times found at the top of the 15 year multiple range. That gets the (SPX) up to 3,732 by the end of 2017, a near double from today?s 1,790.

Not only has 2013 been a great year, so will 2014, 2015, 2016, and 2017. We are in the midst of a new Golden Age of equity investment.

That?s why I wrote ?Why US Stocks Are Dirt Cheap? on August 6.

That?s why the stock market is melting up.

That?s why I?m up 56.63% on the year.

That?s why followers of the Mad Hedge Fund Trader?s Trade Alert service are ecstatic.

That?s why new subscribers are pouring in by the thousands.

Case closed, and please pass me the cranberry sauce and gravy.

It?s Bonus Time for Money Managers

Ringing the Register with the Aussie

Diary, Newsletter

This is our 13^th consecutive closing profitable position, and 19^th consecutive profitable Trade Alert when you include our remaining open positions. I have only seven more winners to go before I break my old record of 25.

Since I strapped on this trade last week, the (FXA) has popped a full 1 ? points to the upside. It?s tough to say where these options are really trading, they are so illiquid and the spreads so wide. If you didn?t do the trade at all, just consider this part of your educational effort.

However, the Currency Shares Australian Dollar Trust December, 2013 $89-$91 bull call spread was marked at their maximum possible value of $2.00 by the market makers at last night?s close. So I am going to take the hint and close the position. At this price we have harvested 75% of the potential profit, and we still have a full month to run before the December 20 expiration.

Yes, I should have been more aggressive, moving the strikes closer to the money, farther out in expiration, and bigger in size. But it?s always easy to say that about your winners.

To close the position just put in a limit order for the entire spread at $1.95 and wait for the market to come to you, even if it is for a few days. It is impressive how much they are crushing volatility in the options markets in the run up to the Thanksgiving holidays, so you should eventually get done.

Then you can plow the money back into other trades, such as buying global stocks and commodities, and shorting bonds and the yen. You can also buy back the Aussie on the next two-point dip.

I still believe that we are in bull mode for the Aussie longer term, and that we should make it above par, or $1.00, next year. The recent reforms announced by China (FXI) last week certainly remove any doubt about the northward direction.

It all provides fresh rocket fuel for the global synchronized recovery in 2014, which I have been predicting since the summer. A parallel pop in Australian stocks (EWA) confirms this view. So if you aren?t in the options and own the (FXA) outright, I?d hang in there.

The Aussie has been Hopping

November 20, 2013 - Quote of the Day

Quote of the Day

?The days of leading companies or countries via a one-way conversation are over. The old system of ?command and control? ? using carrots and sticks --to exert power over people is fast being replaced by ?connect and collaborate?.? said author Dov Seidman.

Follow Up to Trade Alert - (IWM) November 19, 2013

Trade Alert

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

Follow Up to Trade Alert - (SPY) November 19, 2013

Trade Alert

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

November 19, 2013 - MDT - Midday Missive

MDT Alert

While the Diary of a Mad Hedge Fund Trader focuses on investment over a one week to six-month time frame, Mad Day Trader, provided by Jim Parker, will exploit money-making opportunities over a brief ten minute to three day window. It is ideally suited for day traders, but can also be used by long-term investors to improve market timing for entry and exit points.