The Armageddon crowd must be slitting their wrists today watching gold hit a new four month low in the wake of the global interest rate rally.
No flight to safety here.
The Armageddon crowd are the guys who are perennially predicting the collapse of the dollar, the default of the US government, hyperinflation, and the end of the world.
Better to keep all your assets in gold and silver, store at least a year?s worth of canned food, and keep your guns well oiled and supplied with ammo, preferably in high capacity magazines.
If you followed their advice, you lost your shirt.
I have broken many of these wayward acolytes of their money-losing habits. But not all of them. There seems to be an endless supply emanating from the hinterlands.
The Oracle of Omaha, Warren Buffet, often goes to great lengths to explain why he despises the yellow metal.
The sage doesn't really care about gold whatever the price. He sees it primarily as a bet on fear.
If investors are more afraid in a year than they are today, then you make money on gold. If they aren't, then you lose money.
The only problem now is that fear ain't working.
If you took all the gold in the world, it would form a cube 67 feet on a side, worth $5 trillion. For that same amount of money, you could own other assets with far greater productive earning power including:
*All the farmland in the US, about 1 billion acres, which is worth $2.5 trillion.
*8 Apples (AAPL), the largest capitalized company in the world, at $634 billion.
Instead of producing any income or dividends, gold just sits there and shines, making you feel like King Midas.
I don't know. With the stock market at an all time high, and oil trading at $50/barrel, a bet on fear looks pretty good to me right now.
I'm still sticking with my long term forecast of the old inflation-adjusted high of $2,300/ounce.
It is just a matter of time before emerging market central bank buying pushes it up there.
Featured Trade: (GOING BACK INTO THE GOLD TRADE), (GLD), (GDX), (ABX), (NEW), (CALLING THE TOP IN OIL), (USO), (XLE), (XOM), (TRADING FOR THE NON-TRADER), (ROM), (UXI), (UCC), (UYG)
Let me tell you what is happening with the price of gold.
The barbarous relic snapped out of a five-year bear market in January, delivering a very smart 31.68% rally during the first half of 2016.
The big driver was the sudden collapse of European and Japanese interest rates to hugely negative levels, some to -0.40%.
That gave gold (GLD) a real positive return, some 40 basis points, compared to European and Japanese cash returns.
By July, gold reached a multiyear high at $1,350, and speculative longs in the futures market rocketed to all time highs.
There it levitated for three months, and the price for the yellow metal moved sideways.
Then, the Bank of Japan peed on the parade, allowing overnight rates to float back up to 0.10% by failing to expand quantitative easing, its hyper aggressive monetary program.
The European Central Bank followed suit. A flash fire ensued in the movie theater, French-frying many trading longs in gold and triggering massive stop loss orders to sell.
That took us down a gut churning 11.6% in short order. Speculative longs are now a shadow of their former selves.
Therefore, it is safe to stick your toe back in the water on the gold trade.
I believe we are only in the first year of a new 20-year bull market in gold.
China has to buy a 10,000 metric tonnes of the sparkly stuff worth $471 billion over the next 40 years to reach the same levels as Western central banks.
That works out to 250 tonnes a year. Recently, it has only been buying 250 tonnes a year on the open market. In other words, it is falling behind.
https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/Gold-Bars.jpg232288DougDhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDougD2016-10-12 01:08:112016-10-12 01:08:11Going Back Into the Gold Trade
I?m calling the top in oil right here, but only for this month.
Longer term, we are headed upwards. But that is more of a 2017 story.
If you can?t do options, buy the ProShares Ultra Short Bloomberg Crude Oil ETF (SCO) for a quick trade.
The concept behind this trade is really very simple.
This is a bet that the United States Oil Fund (USO) will not rise above $12.50 by the November 18 expiration date, a new high for 2016.
An agreement to cap production at the Algiers OPEC meeting delivered a monster 20.40% short covering rally in oil. The quotas will be fixed at the next OPEC meeting in Vienna on November 30.
However, not a single person in the industry believes the agreement will be finalized, or if finalized, not honored. Cheating inside OPEC is legendary. The Saudis know this.
Therefore, I think oil will put in a short-term top here, and then trade sideways to down for the next month.
In addition, the current $51/barrel I see on my screen is going to stimulate a ton of new production from US frackers.
Thanks to rapidly accelerating technology, American drillers can turn oil production on and off faster than at any time before in history.
There are now over 1,000 DIP wells in inventory, wells that have been drilled, but not completed, and they can be brought online in months. That alone is worth 1 million barrels a day in new US production.
Also to consider are Iraq?s military victories against ISIS and the outbreak of stability in Libya, both of which will generate substantial new oil supplies.
I think the bear market in oil is over, thanks to a recovering global economy. I intend to write a major research piece as to why in a few days.
I just don?t think we are blasting though to a new yearly high in oil in the next 28 trading days, given the OPEC dynamics.
Hence, the short side (USO) trade alert.
Be sure you've signed up for our FREE text alert service. When seconds count, this feature offers a trading advantage.? In today's market, investors need every advantage they can get.
Here are the specific trades you need to execute this position:
https://www.madhedgefundtrader.com/wp-content/uploads/2016/02/OIL-GUSHER-e1456269567957.png367400DougDhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDougD2016-10-12 01:07:212016-10-12 01:07:21Calling the Top in Oil
I like to start out my day by calling subscribers on the US east coast and Europe, asking how they like the service, are there any ways I can improve it, and what topics would they like me to write about.
After all, at 5:00 AM Pacific time, they are the only ones awake.
You?d be amazed at how many great ideas I pick up this way, especially when I speak to industry specialists or other hedge fund managers.
Even the 25-year-old day trader operating out of his mother?s garage has been know to educate me about something.
So when I talked with a gentleman from Tennessee recently, I heard a common complaint. Naturally, I was reminded of my former girlfriend, Cybil, who owns a mansion on top of the levee in nearly Memphis.
As much as he loved the service, he didn?t have the time or the inclination to execute my market beating Trade Alerts.
I said ?Don?t worry. There is an easier way to do this.?
Only about a quarter of my subscribers actually execute my Trade Alerts. The rest rely on my research to correctly guide them in the management of their IRAs, 401ks, pension funds, or other retirement assets.
There is also another, easier way to use the Trade Alert service. Think of it as ?Trade AlertLight?. Do the following:
1) Only focus on the four best of the S&P 500?s 101 sectors. I have listed the ticker symbols below.
2) Wait for the chart technicals to line up. Bullish long term ??Golden crosses? are setting up for several sectors.
? 3) Use a macroeconomic tailwind, like the ramp up from a 1.5% GDP growth rate to 3% we are currently seeing.
4) Shoot for a microeconomic sweet spot, companies and sectors that enjoy special attention.
5) Increase risk when the calendar is in your favor, such as during November to May.
6) Use a modest amount of leverage in the lowest risk bets, but not much. 2:1 will do.
7) Scale in, buying a few shares every day on down days. Don?t hold out for an absolute bottom. You will never get it.
The goal of this exercise is to focus your exposure on a small part of the market with the greatest probability of earning a profit at the best time of the year. This is what grown up hedge funds do all day long.
Sounds like a plan. Now what do we buy?
(ROM) ? ProShares Ultra Technology 2X Fund ? Gives you a double exposure to what will be the top performing sector of the market for the next six months, and probably the rest of your life. Click the link for details and largest holdings http://www.proshares.com/funds/rom.html.
(UXI) ? ProShares Ultra Industrial Fund 2X ? Is finally rebounding off the back of a dollar that will slow down its ascent once the first interest rate hike is behind us. . Onshoring and incredibly cheap valuations are other big tailwinds here. For details and largest holdings, click http://www.proshares.com/funds/uxi_index.html.
(UCC) ? ProShares Ultra Consumer Services 2X Fund ? Is a sweet spot for the economy, as tight-fisted consumers finally start to spend their gasoline savings, now that it no longer appears to be a temporary windfall. This is also a great play on a housing market that is on fire. It contains favorites like Home Depot (HD) and Walt Disney (DIS), which we know and love. For details and largest holdings, click http://www.proshares.com/funds/ucc.html.
(UYG) ? ProShares Ultra Financials 2X Fund ? Yes, after six years of false starts, interest rates are finally going up, with a December rate hike by the Fed a certainty. My friend, Janet, is handing out her Christmas presents early this year. This instantly feeds into wider profit margins for financials of every stripe. For details and largest holdings, click http://www.proshares.com/funds/uyg_index.html.
Of course, you?ll need to keep reading my letter to confirm that the financial markets are proceeding according to the script. You will also have to read the Trade Alerts, as we include a ton of deep research in the Updates.
You can then unload your quasi-trading book with hefty profits in the spring, just when markets are peaking out. ?Sell in May and Go Away?? I bet it works better than ever in 2017.
With the British pound (FXB) at a 31-year low, I?m booking my flat in central London for June already.
https://www.madhedgefundtrader.com/wp-content/uploads/2015/11/John-Thomas-e1447108172932.jpg322400Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2016-10-12 01:06:142016-10-12 01:06:14Trading for the Non-Trader
?It is difficult to get a man to understand something when his salary depends upon his not understanding it.? said the Pulitzer Price winning author, Upton Sinclair.
https://www.madhedgefundtrader.com/wp-content/uploads/2015/11/Paying-e1447106085318.jpg197300Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2016-10-12 01:05:112016-10-12 01:05:11October 12, 2016 - Quote of the Day
Featured Trade: (DON'T MISS THE OCTOBER 12th LIVE GLOBAL STRATEGY WEBINAR), (UPGRADE TO MAD OPTIONS TRADER NOW TO BEAT THE PRICE INCREASE), (WELCOME TO THE EIGHT-WEEK YEAR), (SPY), (QQQ), (IWM), (TLT), (BAC), (GS)
SPDR S&P 500 ETF (SPY) PowerShares QQQ ETF (QQQ) iShares Russell 2000 (IWM) iShares 20+ Year Treasury Bond (TLT) Bank of America Corporation (BAC) The Goldman Sachs Group, Inc. (GS)
That was the reply I received from Mad Options Trader, Matt Buckley, known to his fellow traders as ?Whiz,? regarding my question about his two-month performance.
That is how much traders have made since the August 1 free trial started for our new Mad Options Trader service for each $100,000 of invested capital.
I knew Whiz had a hot hand. But when I heard those numbers, they blew me away.
I knew something big was happening when unsolicited testimonials started pouring in.
First, there was Frank in Dallas, Texas who said,
?I just wanted to tell you what a great find the Mad Options Trader was for you. I stumbled into two of his trades this week and made enough profit to pay for two years of his service. I know he may eventually cool off, but he is hot now.?
Then, I got another one from Bill in Richmond, Virginia who gushed, ?Trading with Whiz is like having a rich uncle. He cuts me a check once a week for $2,000. I've never been able to do this before.?
The last two weeks have been especially eye opening.
Whiz went into the September 17th Fed decision long volatility through the (VXX) and clocked a $12,000 winner in one week.
Then he flipped to the short side when Janet Yellen took no action on rates, picking up another $4,000.
He took a small hit going into the OPEC surprise Algiers deal with a short oil (USO) deal. He mitigated some of those losses with a long position in the S&P 500 (SPY).
What?s Whiz doing now?
He is scaling into ultra long dated positions in Goldman Sachs (GS) January, 2019 call options.
The bet is that sometime over the next two years, interest rates will rise, and Goldman shares will explode. He then trades against this position with weekly and monthly short positions.
It is all typical big hedge fund type stuff that the small individual retail trader never sees.
At the request of several readers, I have therefore conducted an audit of the long term trading performance of the Mad Options Trader.
The numbers blew my mind.
Since May 20, 2014, the Mad Options Trader has delivered A STUNNING 231.45% PROFIT, net of fees (see chart below).
This is during a period when the overall market performance was essentially zero.
As a result of this stellar performance, Whiz israising his price for an upgrade to your existing Global Trading Dispatch from $1,500 to $2,000 a year.
And quite justifiably so.
It is only because we are fellow combat pilots that he is letting my regular subscribers get in at the old price one final time.
BUT ONLY IF YOU ACT THIS WEEK!
Nancy is taking orders now. You can email her directly with your request at support@madhedgefundtrader.com. Just put ?MOT UPGRADE? into the subject line. The? Mad Options Trader service focuses primarily on the weekly US equity options expirations, with the goal of making profits at all times.
The trading will place in the S&P 500 (SPY), major industry ETFs like the Financials Select Sector (XLF), and large capitalized single names, such as Facebook (FB), JP Morgan Chase & Co. (JPM), and Apple (AAPL).
Matt?s performance works out to an eye-popping average 7.92% a month, and annualizes out to an incredible 95.11% a year.
Matt, a native of New Jersey, joined the Navy straight out of college, and rose to become an F-18/A fighter pilot. He attended the famous Top Gun school in Coronado, California. During the second Iraq War, Matt flew 44 combat missions.
Matt left the service in 2006, and immediately entered the hedge fund industry. A rapid series of promotions eventually took him to Peak6 Investments, L.P., a prominent Chicago hedge fund.
There, he soaked up the most crucial elements of technical market timing, fundamental name selection, risk control, and options trade execution.
These are the multiple skills that have enabled Matt to post such a blockbuster performance.
Matt, known to his friends by his old pilot handle of ?Whiz?, is an incredibly valuable addition to the Mad Hedge Fund Trader team. I have appointed him Head of Options Trading.
I have known for some time that fortunes were being made in the weekly options expirations, where stories of tenfold returns are not unheard of. It is a strategy that is perfectly suited to these highly volatile, uncertain times, with most options positions expiring within four days.
Matt allows us to fill that gap in our product offerings.
The Mad Options Trader provides essential support for the active trader, and includes:
1) Instant Trade Alerts sent out at key technical levels, an average of one a day. Alerts will be sent out on the opening and closing of every position.
2) Weekly Market Strategy Webinars held every Monday at 1:00 PM EST to give you a head?s up on the week ahead.
3) A weekly Live Trading Room held every Tuesday from 9:00 to 11:00 AM EST to give followers active real time trading experience.
4) Specialized Training Webinars on how to best execute Matt?s trades.
What I love about Matt is that he eats his own cooking.
Many of the Trade Alerts he recommends are executed in his own personal retirement account with real dollars.
I?ve never felt better about recommending a new product.
Good Luck and Good Trading, John Thomas Publisher and CEO of the Diary of a Mad Hedge Fund Trader
https://www.madhedgefundtrader.com/wp-content/uploads/2016/10/MOT-Performance-9-20-16-e1476147612546.jpg357580DougDhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDougD2016-10-11 01:07:272016-10-11 01:07:27Upgrade Now to Beat the Mad Options Trader Price Increase
Both the major stock and bond indexes are up about 6% on the year.
Those who left on January 1st to sail a yacht around the world, engage in a research project in Antarctica, or meditate at an Ashram in India, will return today and discovery that 2016 effectively didn?t happen, at least as far as the financial markets are concerned.
Index funds are still showing barely positive numbers, as they have to atone for management, administration, and other hidden costs. Active managers are down even more.
And who is doing worst of all?
The Masters of the Universe, like hedge fund titan Bill Ackman, who is licking massive double-digit performance wounds this year. Other hedge funds are dying on the vine.
I heard that Citadel?s unfortunate hedge fund manager has moved to Brazil to look for all the money he lost there.
Watch out for those aging Nazis!
So, almost everyone in the financial advisory and portfolio management industry now has two months in which to make their 2016.
The industry effectively shuts down on December 18.
WELCOME TO YOUR EIGHT WEEK YEAR!
Unless, of course, you read the Diary of a Mad Hedge Fund Trader, and are up a blistering 15% this year. I know of many who have doubled their money since January following my timely advice.
Which brings us all to the eternal question of ?NOW WHAT DO WE DO??
There is absolutely no doubt that we have entered the next leg of what could eventually be an 8-10 year bull market. The S&P 500 hit new all time highs only months ago. New peaks are to come shortly.
I looked to other asset classes to add ?RISK ON? positions. That means buy stocks (SPY), QQQ), (IWM) on absolutely every dip from here on and sell short ?RISK OFF? positions like the Treasury bond market (TLT), (TBT) and the Japanese yen (FXY), (YCS).
Almost every Trade Alert in these areas has proven profitable for me in recent months.
As for equities, I am not inclined to chase monster 20%-30% rallies. What I will do is buy them on a nice 5%-10% dip, or after a sideways digestion-type move of several weeks.
Post election November is setting up to be just that kind of month.
Here are ten reasons why I believe the bull market in shares is still alive and well:
1) Stocks are selling at only 19 X 2016 earnings, not exactly a bargain (it?s double the 2009 low). The October rally is telling us that there will be a major rebound in earnings next year, and that GDP growth could ratchet back up to 3%.
Look no further than technology and cyclicals which are all on fire.
2) The $60 plunge in oil prices from the 2014 highs is still with us. So is the windfall tax cut on consumer spending. This could add a full 1% to US GDP growth in 2017, which has essentially come out of nowhere. However, consumers are, at last, spending their money now, not banking it.
3) The Christmas selling seasons is setting up to be a strong one, thanks to a friendly calendar and renewed consumer confidence. Good luck standing in line at Needless Mark Up, I mean Neiman Marcus.
4) The November 8 elections are basically over, but I already know who the winner is: Gridlock. No matter who wins the Senate, they are unlikely to also capture both houses of congress.
Plan for another 5-9 years of gridlock, and no change in economic policies or tax law. By then, I?ll be dead and won?t care what happens.
5) The final blow off top is in for the bond market. There is a 50/50 chance that my friend, Federal Reserve Chairwoman Janet Yellen, will drive the final dagger through the heart of this monster with a 25 basis point rate hike at the next meeting on December 16-17.
What a nice Christmas present that will be! A reversal would be very friendly for financials, Bank of America (BAC) and Goldman Sachs (GS) which should provide new market leadership.
6) Mergers and acquisitions are continuing at a torrid pace and are getting larger and larger. This is happening because companies see each other as cheap, not expensive, and this usually happens at market bottoms.
The quickest way to grow earnings in a hyper competitive world is to buy them, especially if you can obtain them at a zero cost of funds.
7) Those who aren?t merging are buying their own stock back with both hands, like Apple, at a staggering $1 trillion annualized rate. Such purchases will peak this month.
8) Volatility (VIX) spikes like the ones we saw in August and September also signal major market bottoms (see chart below). After briefly tickling 21 in September, we have made it all the way back to an unbelievable 13.38.
9) A strong dollar demolished multinational earnings this year. While rising interest rates assure the bull market for the greenback will continue, it will be at nowhere near the rate that we saw this year. This is stock market positive.
10) Ever heard of ?Sell in May and Go Away?? Well, ?Buy in November and stay put until April? is also true. October is usually the worst month of the year to sell and is not the path to untold riches.
The net net of all of this is that you can look for the S&P 500 to reach 2,300-2,400 by March, up 10%-15% from present levels.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/John-Thoms-Black-Swans-e1413901799656.jpg337400DougDhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngDougD2016-10-11 01:06:302016-10-11 01:06:30Welcome to the Eight-Week Year
There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.
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