Nothing beats instant gratification. Bragging rights are nice too.
On Monday, when I strapped on this trade, angry readers emailed me to tell me that I was truly out of my mind. Apple was an ex-growth company, had lost its ability to innovate, shed its ?cool? factor, and had fallen behind Samsung with its large screen smart phone. The shares were clearly in a free fall to under $300, and I had to be ?Mad? to urge people into the stock at $395.
The Tuesday Q1, 2013 earnings changed everything. Revenues blew out to the upside at $43 billion, profits surprised at $9.5 billion, and earnings shocked, coming in at $10.09. Analyst forecasts minutes earlier ran as low as $8. The company sold a stunning 37.4 million iPhones and 19.5 million iPads.
Best of all, it returned a wad of cash to shareholders; increasing the dividend by 15% and boosting its share buyback program to $60 billion. It can afford to do so because it has an unprecedented $145 billion in cash on its balance sheet.
Not only is Apple now a value stock, it is a high yield value stock, offering investors a 3% annual yield at these prices, compared to only 2% for the S&P 500. Pension funds will not ignore this for long.
All of a sudden, Apple has recovered its ?cool? factor and is back at the forefront of innovation. Its dominance in apps and iTunes gives it a huge sinecure in risk free income. The six or so new products it will launch in the fourth quarter of this year, like a low end smart phone for emerging markets, Apple TV, the iPhone 5s, a deal with China Mobile, and new generations of iPods and iPads, all look incredibly interesting. What a difference three days makes!
So it is time for me to take profits on my (AAPL) May, 2013 $320-$350 Call spread. I?m really doing this so I can print out the confirm and carry it around in my wallet next to my spare condom. That way I can whip it out and prove any bar challengers that I made money in Apple on the long side this year, no easy task.
I am also encouraged to take profits here because I have captured 95% of the potential profit in the call spread. Why bother carrying a position in one of the most volatile stocks in the market for three more weeks for an extra 2 basis points?
For options traders, there was something really interesting that happened to Apple this week. Although the shares have risen only $15, or 3.8% in three days, the value of my deep out-of-the-money call spread has soared by 11.4%. That is because implied volatilities on the options have completely crashed. This suggests that the last bottom in Apple shares at $392 is the final one.
I think there is a high probability that the final bottom is in for Apple shares. Sure, the Q2, 2013 revenue forecast was dire at only $33.5-35.5 billion, but everyone expected this. We will know for sure if the stock can break the 50-day moving average at $435. If it does, then it is off to the races once again, and $500 becomes a chip shot. That means flipping from selling rallies to buying dips, possibly for years. But it will take years to breach the old high of $706 once more.
Let me tell you how they could get there. What if the Federal Reserve normalizes interest rates and raises overnight rates from zero to 2%? Apple?s $145 billion cash mountain would throw off an extra $3 billion in interest income a year, boosting the company?s profits, and possibly its share price, by a third. Imagine that? Steve Jobs? ghost must be laughing!
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Steve-Jobs.jpg222509Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-26 09:22:102013-04-26 09:22:10Steve Jobs? Last Laugh
It?s another sign of the times when the weekend fruit picker population is doubled by people hard hit by the economy, looking to save money on food costs.
After driving through miles of undulating brown hills studded with oak trees, passing mile upon mile of horse ranches, rusted out cars, and abandoned mobile homes, you come to Brentwood, the fruit capital of Northern California. There, thousands of families, half from Asia, harvest ripe bing cherries and peaches at the wholesale price of $1 a pound, fruit that normally costs $6 a pound at the supermarket. It all is a great opportunity to teach young kids the value of hard work, and where their food comes from. Anything you eat in the orchard is free, an old California tradition. No doubt none of these people are counted in the government?s employment statistics.
It is all a great deal if you don?t mind having purple fingertips at the end of the day. Just watch out for the cars pulled over on the side of the road on the way home, their occupants puking out all their excess cherries. In a nod to the 21st century, growers in this Grapes of Wrath industry compile lists of email addresses, and notify their itinerant fruit pickers which crops are ready for harvest via the Internet. Also on the calendar this season are grapes, apples, apricots, plums, loquats, nectarines, mandarin oranges, and wheel chair accessible walnuts (?)
At the end of each harvest, professional crews sweep through and pick up what?s left, if the prices will bear it. If you wonder why we put up with the earthquakes, high taxes, gridlocked politics, and a non-functioning state government, this is the reason.
By the way, does anyone know what to do with 50 pounds of cherries? Send me your recipes.
Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-26 09:17:442013-04-26 09:17:44Grapes of Wrath Redux
Featured Trade: (MAY 8 LAS VEGAS STRATEGY LUNCHEON), (SELL IN MAY HAS ALREADY STARTED), (SPY), (IWM), (TLT), (TBT), (GLD), (SLV), (USO), (UNG), (CHINA?S VIEW OF CHINA), (FXI), (EEM)
SPDR S&P 500 (SPY)
iShares Russell 2000 Index (IWM)
iShares Barclays 20+ Year Treas Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
SPDR Gold Shares (GLD)
iShares Silver Trust (SLV)
United States Oil (USO)
United States Natural Gas (UNG)
iShares FTSE China 25 Index Fund (FXI)
iShares MSCI Emerging Markets Index (EEM)
Come join me for lunch at the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Las Vegas, Nevada on Wednesday, May 8, 2013. 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. I will also explain how I have been able to deliver a blowout 40% return since the November, 2012 market bottom. 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 PowerPoint presentation will be emailed to you three days before the event.
The lunch will be held at a major Las Vegas hotel on the Strip, the details will be emailed with your purchase confirmation. Please make your own hotel reservations, as business there is booming.
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/2012/08/las-vegas-welcome-sign.jpg487325Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-25 09:21:132013-04-25 09:21:13May 8 Las Vegas Strategy Luncheon
I ran into Minxin Pei, a scholar at the Carnegie Endowment for International Peace who imparted to me some iconoclastic, out of consensus views on China?s position in the world today.
He thinks that power is not shifting from West to East; Asia is just lifting itself off the mat, with per capita GDP at $5,800, compared to $48,000 in the US. We are simply moving from a unipolar to a multipolar world. China is not going to dominate the world, or even Asia, where there is a long history of regional rivalries and wars.
China can?t even control China, where recessions lead to revolutions, and 30% of the country, Tibet and the Uighurs, want to secede. China?s military is entirely devoted to controlling its own people, which make US concerns about their recent build up laughable.
All of Asia?s progress, to date, has been built on selling to the US market. Take us out, and they?re nowhere. With enormous resource, environmental, and demographic challenges constraining growth, Asia is not replacing the US anytime soon.
There is no miracle form of Asian capitalism; impoverished, younger populations are simply forced to save more, because there is no social safety net. Try filing a Chinese individual tax return, where a maximum rate of 40% kicks in at an income of $35,000 a year, with no deductions, and there is no social security or Medicare in return. Ever heard of a Chinese unemployment office or jobs program?
Nor are benevolent dictatorships the answer, with the despots in Burma, Cambodia, North Korea, and Laos thoroughly trashing their countries. The press often touts the 600,000 engineers that China graduates, joined by 350,000 in India. In fact, 90% of these are only educated to a trade school standard. Asia has just one world-class school, the University of Tokyo.
As much as we Americans despise ourselves and wallow in our failures, Asians see us as a bright, shining example for the world. After all, it was our open trade policies and innovation that lifted them out of poverty and destitution. Walk the streets of China, as I have done for nearly four decades, and you feel this vibrating from everything around you. I?ll consider what Minxin Pei said next time I contemplate going back into the (FXI) and (EEM).
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/China-Parade.jpg266401Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-25 09:14:122013-04-25 09:14:12China?s View of China
Featured Trade: (JULY 2 NEW YORK STRATEGY LUNCHEON), (THINGS ARE HEATING UP IN MEXICO), (EWW), (UMX), (BSMX), (EEM), (BUDGET CUTS HOT THE WILD ANIMAL MARKET)
iShares MSCI Mexico Capped Invstbl Mkt (EWW)
ProShares Ultra MSCI Mexico Cppd IMI (UMX)
Grupo Financiero Santander S.A.B. de C.V. (BSMX)
iShares MSCI Emerging Markets Index (EEM)
Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Seminar, which I will be conducting in New York, NY on Tuesday, July 2, 2013. An excellent three-course lunch will be provided. A PowerPoint presentation will be followed by an extended question and answer period.
I?ll be giving you my up to date view on stocks, bonds, foreign currencies, commodities, precious metals, and real estate. And to keep you in suspense, I?ll be throwing a few surprises out there too. Enough charts, tables, graphs, and statistics will be thrown at you to keep your ears ringing for a week. Tickets are available for $209.
The formal luncheon will run from 12:00 to 2:00 PM. I?ll be arriving an hour early 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 event will be held at a prestigious private club on Central Park South, the details of which will be emailed to you 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/2013/04/Empire-State-Building.jpg380253Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-24 09:32:102013-04-24 09:32:10July 2 New York Strategy Luncheon
In case you missed it, the second hand animal market has crashed. Forced to slash budgets by cash starved municipalities, the nation?s public zoos have been paring back their collections of living exhibits.
The Washington Zoo is trying to offload a 7,000 pound hippopotamus; while the San Francisco Zoo is short some tigers after one ate a visitor and had to be shot. The Portland Zoo was able to liquidate a portfolio of lemurs only because of the popularity of the recent DreamWorks? ?Madagascar 3? animated film.
When zoos are forced to economize, they downsize the big eaters first to save on feed costs; hence, the absence of elephants in San Francisco (Could this be a political gesture?). In fact, zoo staff was recently busted for illegally harvesting acacia on private property, a favorite food of giraffes, which grows wild here after its introduction a century ago.
The hardest to move? Baltimore has been trying to sell its snake collection for two years now. Talk about an illiquid market. Maybe they should try AIG. Snake derivatives anyone?
https://www.madhedgefundtrader.com/wp-content/uploads/2013/04/Tiger.jpg285226Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-24 09:18:422013-04-24 09:18:42Budget Cuts Hit the Wild Animal Market
When the Dow crashed 514 points in a single day a few years ago, the market lost a staggering $850 billion in market capitalization. High frequency traders were possibly responsible for half of this move, but generated a mere $65 million in profits, some 7/1,000?s of a percent of the total loss. Are market authorities and regulators being penny wise, but pound foolish?
The carnage the HF traders are causing is triggering a rising cry from market participants to ban the despised strategy. Many are calling for the return of the ?short sale test tick rule?, or SEC Rule 17 CFR 240.10a-1, otherwise known as the ?uptick rule?, which permits traders to execute short sales only if the previous trade caused an uptick in prices.
The rule was created eons ago to prevent the sort of cascading, snowball selling that we are seeing today. It was repealed on July 6, 2007. Check out a chart of the volatility that ensued and it will make the hair on the back of your neck raise.
Those unfamiliar with how algorithmic trading works see it as something akin to illegal front running. ?Co-location? of mainframes with exchange computers, or having them in adjacent rooms, gives them another head start over the rest of us. Much of the trading sees HF traders battling each other, and involves what used to be called ?spoofing?, the placing of large, out of the market orders with no intention of execution. Needless to say, if you or I tried any of these shenanigans, the SEC would lock us up in the can so fast it would make your head spin.
Many accuse exchange authorities of a conflict of interest, allowing members to reap sizeable custody fees from HF traders, while the rest of us get taken to the cleaners. Co-location fees run in the hundreds of thousands of dollars per customer per month. This is happening while traditional revenue sources, like proprietary trading, are disappearing, thanks to Dodd-Frank. There is no doubt that the volatility is driving the retail investor from the market.
In fact, HF trading has been around since the nineties, back when the uptick rule was still in place and colocation was a term out of Star Trek. But it was small potatoes then, confined to a few niche players like Renaissance, and certainly lacked the firepower to engineer 500 point market swings.
The big problem with this solution is that HF trading now accounts for up to 70% of the daily trading volume. Ban them, and the market volatility will shrink back to double digit trading ranges that will put us all asleep. The diminished liquidity might make it difficult for the 800 pound gorillas of the market, like Fidelity and Caplers, to execute trades, further frightening end investors from equities. It is possible that we have become so addicted to the crack cocaine that HF traders provide us that we can?t live without it?
HF Traders Are Driving Individual Investors Out of the Market
https://www.madhedgefundtrader.com/wp-content/uploads/2013/08/Art-work.jpg467352Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2013-04-24 02:06:172020-03-23 06:15:46Bring Back the Uptick Rule! 2013
Legal Disclaimer
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.
We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.
Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.
Essential Website Cookies
These cookies are strictly necessary to provide you with services available through our website and to use some of its features.
Because these cookies are strictly necessary to deliver the website, refuseing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.
We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.
We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.
Google Analytics Cookies
These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.
If you do not want that we track your visist to our site you can disable tracking in your browser here:
Other external services
We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.