Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in San Francisco on Friday, April 25, 2014. An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets are available for $179.
I?ll be arriving at 11:00 and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at a private club in downtown San Francisco near Union Square that will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/02/San-Francisco-e1410363065903.jpg238359Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-04 01:05:182014-03-04 01:05:18Friday, April 25 San Francisco Strategy Luncheon
It was another one of those midnight calls from my old KGB friend.
Yuri was assigned to tail me in Tokyo during the 1970?s. He even came to my wedding as the official TASS correspondent. We have stayed in touch ever since. After the fall of the Soviet Union, he landed on his feet (as did his buddy, Vladimir Putin), eventually ending up in the hedge fund industry.
Yuri told me that Moscow had just dispatched another 6,000 heavily armed troops to its naval bases in Crimea, part of the Ukraine, and more were on the way. There, Russia has long-term leases; much like the US still has a presence in Guantanamo, Cuba. It is a crucial defensive arrangement that gives Russia access to its only all year, warm water ports.
The markets certainly voted with their feet, belying Russia?s important role in the global economy. A shooting war in the Ukraine would block the oil terminals for Russia?s largest export, choking off a principal source of revenue for the government, prompting Brent to pop $2.50. This is why Hitler invaded the region in 1942. It was all about energy, as it always is.
That will certainly be welcome news in Moscow. Indeed, boosting the price of Russia?s largest earner is seen by many as the principal impetus for the aggressive military move. That?s good for Putin, but bad for us.
You also saw higher prices for natural gas, another huge export from Russia to Europe, where the pipelines also cross the Ukraine. But gas is not an internationally traded commodity, just a collection of disparate local markets, so the impact in the US will be minimal. The coming spring is the big issue for this market.
Wheat, however, is another story. The Ukraine is one of the world?s principal grain exporters. This is why Napoleon invaded Russia in 1812. Take Ukraine out of the market, and several Middle Eastern countries quickly go hungry.
They certainly figured this out quickly in the Chicago pits, where prices (WEAT) rocketed by 5%. The move caught many traders short, who were anticipating a continuation of the three-year bear market.
Of course, stocks everywhere were trashed, especially the Market Vectors Russia ETF Trust (RSX), which dove by 17% since the crisis began two weeks ago. Normally, the (RSX) rises in tandem with appreciating oil prices. But nobody cares, as emerging markets (EEM) have been out of favor for some time, and once again are one of the worst performing asset classes in 2014.
Knowing that my friend has a strong history bent, as I, I asked if we were heading into a second Crimean War, Russia having won the last one in 1856 (remember the Charge of the Light Brigade?). Worse, is World Way III on its way? Russia still has 8,800 nuclear weapons, compared to our 3,500 (we bought their other 6,000 to run our nuclear power plants after the fall of the Soviet Union).
Not a chance, he replied. There is a reason why Russians are Grand Master chess players. The entire reason behind the crisis was to preserve Russia?s interests in any new Ukrainian government, the last one having just scampered off to collect on their Swiss bank accounts.
Be nice, and the troops go home. Be not so nice, and there will be a massacre, with Russia the overwhelming winner. Ukrainian troops are wisely confined to base, and there is no movement of Russian ships whatsoever. The signs of escalation are nowhere.
All of my contacts in Russia tell me that the chances of war happening are nil. Russia has such an overwhelming military advantage that this is a conflict that will be solved by writing checks, and not pulling triggers.
Remember, Russian leaders are all about projecting strength and are great at bluffing. (During the 1962 Cuban missile crisis, Nikita Khrushchev possessed only four operational atomic bombs). This is why Clint Eastwood is such a big movie star there.
Unfortunately, the Ukraine traded off all of its nuclear weapons in exchange for European security guarantees, which today are not worth the paper they are written on.
It all amounts to a storm in a teacup if you live anywhere but the Ukraine. The real concern is what Putin will do next. Thus emboldened, he may pick off another former Soviet Republic. This goes down very well with his domestic, nationalist base, which is still angry over their loss of the cold war.
If Putin continues his expansionist military policies, it could eventually lead to a return of the cold war. That would be a huge buzz kill for our bull market in stocks, as the peace dividend goes up in smoke and our economy returns to a war footing. At the end of the day, that would come straight out of corporate earnings, and your pockets.
Fortunately, a new cold war is highly unlikely. The last one drove the Soviet Union into bankruptcy. In the end, we outspent them to death. Our credit card was bigger than theirs. A much smaller Russia isn?t going to rejoin a losing game. America?s military has grown dramatically since then, with the increase almost entirely financed by China. Russia?s military virtually no longer exists, and no one anywhere is willing to bankroll a new one.
What this means for out markets is that no matter how ferocious today?s action, it is only a temporary event. It is curing an overbought condition is risk assets everywhere. After the usual over leveraged stop loss selling, it won?t take long for stocks to resume the upside, and bonds to take another dump. For more detail on how and why this is going to play out, please read yesterday?s letter.
I told my friend, Yuri, thanks and said I owed him another bottle of Stolichnaya vodka. By the way, how is the weather in Crimea in August? I hear beach house rentals there have suddenly gone begging.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Soldiers.jpg292430Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-04 01:04:362014-03-04 01:04:36The New War in the Ukraine
There is a layup of a trade setting up here in the wake of the escalating crisis in the Ukraine. Since January 2, the Treasury bond market (TLT) has enjoyed a massive 8 point rally, taking the ten year yield from 3.05% to 2.60%.
By shorting Treasury bonds here, you are betting that the yield doesn?t drop below 2.48% by March 21, an eight month low. That is only 13 trading days away.
Given a synchronized global economic recovery and rising US corporate earnings across a broad range of industries, the chances of this are minimal.
To get below this level in yields, you really need an out and out shooting war in the Ukraine, a complete nonstarter. Don?t forget that we have a February nonfarm payroll on Friday, which in recent months have been relentlessly disappointing. Therefore, I expect bonds to go nowhere for the rest of the week.
This is all a warm up for a much bigger trade that I am planning, a 10% weighting in the (TLT) June $108 puts outright, which last traded at $2.75. If the (TLT) returns to the $101 bottom, this could be an easy triple, and one of our biggest trades of the year. But you don?t want to consider this until we go over the top on the (TLT) on the charts, and the downside momentum resumes.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Vladimir-Putin.jpg315473Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-04 01:03:002014-03-04 01:03:00Time to Sell the Treasury Market Short
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.
Further Update to: Trade Alert -(TLT)
Buy the iShares Barclays 20+ Year Treasury Bond Fund (TLT) March, 2014 $111-$114 bear put spread at $2.69 or best
Opening Trade
3-3-2014
expiration date: 3-21-2014
Portfolio weighting: 10%
Number of Contracts = 37 contracts
There is a layup of a trade setting up here in the wake of the escalating crisis in the Ukraine. Since January 2, the (TLT) has enjoyed a massive 8 point rally, taking the ten year yield from 3.05% to 2.60%.
By taking on the iShares Barclays 20+ Year Treasury Bond Fund March, 2014 $111-$114 bear put spread, you are betting that the yield doesn?t drop below 2.48% by March 21, a seven month low. That is only 13 trading days away.
Giving rising corporate earnings across a broad range of industries, the chances of this are minimal.
To get below this level in yields, you really need an out and out shooting war in the Ukraine. All of my contacts in Russia tell me that the chances of this happening are nil. Russia has such an overwhelming military advantage that this is a conflict that will be solved by writing checks, and not pulling triggers.
I will go into much more detail into why this is the case in tomorrows letter, when I have some time. In the meantime, get your orders in.
Don?t forget that we have a February nonfarm payroll on Friday, which in recent months have been relentlessly disappointing. Therefore, I expect bonds to go nowhere for the rest of the week. That alone provides 30% of the time decay for this position.
This is all a warm up for a much bigger trade that I am planning, a 10% weighting in the (TLT) June $108 puts outright, which last traded at $2.75. If the (TLT) returns to the $101 bottom, this could be an easy triple, and one of our biggest trades of the year. But you don?t want to consider this until we go over the top on the (TLT) on the charts, and the downside momentum resumes.
The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the trade to come to you. The middle market is the halfway point between the bid and the offered prices that you see on your screen with your online broker.
The difference between the bid and the offer on these deep in-the-money spread trades can be enormous. Don?t execute the legs individually or you will end up losing much of your profit. Keep in mind that these are ballpark prices only. Spread pricing can be very volatile especially on expiration months farther out.
Here are the specific trades you need to execute this position:
Buy 37 March, 2014 (TLT) $114 puts at?????..?$5.15
Sell short 37 March, 2014 (TLT) $111 puts at????$2.46
Net Cost:????????????....??..??.......$2.69
Potential Profit: $3.00 - $2.69 = $0.31
($0.31 X 100 X 37) = $1,117 or 1.15% for the notional $100,000 model portfolio.
https://www.madhedgefundtrader.com/wp-content/uploads/2011/12/FatLady2-2.jpg248400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-03 15:38:432014-03-03 15:38:43Follow Up to Trade Alert - (TLT) March 3, 2014
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
Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-03 15:12:502014-03-03 15:12:50Trade Alert - (TLT) March 3, 2014
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.
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.
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.
Featured Trade: (FRIDAY APRIL 4 INCLINE VILLAGE, NEVADA STRATEGY LUNCHEON), (ALL ASSET CLASS RISK REVERSAL AT HAND), (SPY), (EEM), (TLT), (VXX), (FXY), (YCS), (FXE), (UUP), (WHY WATER WILL SOON BE WORTH MORE THAN OIL), (CGW), (PHO), (FIW), (VE), (TTEK), (PNR), (TESTIMONIAL)
SPDR S&P 500 (SPY)
iShares MSCI Emerging Markets (EEM)
iShares 20+ Year Treasury Bond (TLT)
iPath S&P 500 VIX ST Futures ETN (VXX)
CurrencyShares Japanese Yen Trust (FXY)
ProShares UltraShort Yen (YCS)
CurrencyShares Euro Trust (FXE)
PowerShares DB US Dollar Index Bullish (UUP)
Guggenheim S&P Global Water Index (CGW)
PowerShares Water Resources (PHO)
First Trust ISE Water Idx (FIW)
Veolia Environnement S.A. (VE)
Tetra Tech Inc. (TTEK)
Pentair Ltd. (PNR)
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Incline Village, Nevada on Friday, April 4, 2014. An excellent meal will be followed by a wide-ranging discussion and an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Tickets are available for $198.
I?ll be arriving at 11:30 and leaving late in case anyone wants to have a one on one discussion, or just sit around and chew the fat about the financial markets.
The lunch will be held at the premier restaurant in Incline Village, Nevada on the sparkling shores of Lake Tahoe. The precise location will be emailed with your purchase confirmation.
I look forward to meeting you, and thank you for supporting my research. To purchase tickets for the luncheons, please go to my online store.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/02/Lake-Tahoe-View-e1410283987626.jpg241400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-03 01:06:042014-03-03 01:06:04Friday, April 4 Incline Village, Nevada Global Strategy Luncheon
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