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Mad Hedge Fund Trader

It?s Pedal to the Metal Once Again

Newsletter

If the prospect of WWIII can?t knock this market down, what will it take? A giant asteroid that destroys the earth?

I would have used ?Balls to the Wall? in the headline for this piece. But as this is a family oriented newsletter I opted for the more politically correct screamer.

Even the most hardened and seasoned traders, like me and Mad Day Trader Jim Parker, were stunned by how fast the markets bounced back from Monday?s war scares in the Ukraine. Of course, everything I said in my Monday letter came true.

It would have been nice if the recovery stretched out over a longer period of time, giving me better entry points for my Trade Alerts. But that was not to be. Too many people are still frantically trying to get in this market. There are oceans of cash everywhere earning virtually nothing. It seems the new trading strategy is that if something hasn?t gone down for three days, you buy it.

Bizarre as it may seem, the weather is emerging as the big driver of markets this year. Even the Federal Reserve is now saying that the weather was a big drag on the economy. This means that every negative data point for the next few months has a great excuse to be ignored.

It also means the growth which was lost in Q1 will get added back in during Q2 as the economy plays catch up. This has the potential to create a growth surge, possibly from a 1% annualized rate to as much as a 5% in the spring.

It is inevitable that this would trigger a major spike up in all risk assets. This realization is rippling throughout the markets to create one of those ?Aha? moments, much like we saw last October, when it became obvious that the indexes would melt up for the rest of 2013. Fasten your seat belt!

If you have any doubts about this scenario, you better take a look at the commodities markets, both hard and soft (DBA). After a dreadful three years, the chart now has the trajectory of a bat out of hell. What might cause this? How about a global synchronized economic recovery that boost US growth by a full 100 basis points or higher in 2014?

So I am going to take advantage of the pre Friday nonfarm payroll doldrums to start loading the boat with positions and scaling up risk. That?s why I picked up General Electric (GE) and Delta Airlines (DAL) today, classic cyclical names. Also on the short list are EBAY (EBAY), Gilead Sciences (GILD) for another visit to the trough, Goldman Sachs Group (GS), and QUALCOMM (QCOM).

Today?s new trades graciously turned immediately profitable, taking my performance up to yet another all time high of 134.41% since inception, and a 2014 year to date gain of 11.91%. That improves my average annualized return to a stratospheric 41.4%. Incredibly, after last year?s torrid 68% profit, my performance is getting even better. It appears that, like a fine Napa Valley wine, I improve with age.

Yes, I know you have been told by the talking heads on TV that stocks are expensive, and that a crash is imminent. Personally, I think equities are cheap and that we are on our way to a Dow Average of 100,000-200,000 by 2030 (no typo here). I will keep that view as long as the stocks that I am buying pay higher dividends than the ten-year Treasury yield (TLT), now at 2.69%.

To support my view take a look at the chart below produced by my friends at Business Insider. It shows that the share of technology names, the lead sector for the entire market, trading at more than five times sales is below 40%, a fraction of the 2000 peak.

I think we have to match, or exceed, this peak before the party is over and the lights get turned out.

GE 3-5-14

DAL 3-5-14

DBA 3-5-14

Markets Chart of the Day

Delta

https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Delta.jpg 285 379 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-06 08:42:532014-03-06 08:42:53It?s Pedal to the Metal Once Again
Mad Hedge Fund Trader

March 5, 2014

Diary, Newsletter, Summary

Global Market Comments
March 5, 2014
Fiat Lux

Featured Trade:
(CHICAGO FRIDAY, MAY 23 GLOBAL STRAGEGY LUNCHEON),
(LUCKY FIND SPARKS NEW CALIFORNIA GOLD RUSH), (GLD),
(THE DIFFERENCE BETWEEN MAD HEDGE FUND TRADER AND MAD DAY FUND TRADER),
(THE NEW CALIFORNIA GOLD RUSH)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-05 09:29:122014-03-05 09:29:12March 5, 2014
Mad Hedge Fund Trader

Chicago Friday, May 23 Global Strategy Luncheon

Diary, Lunch, Newsletter

Come join me for lunch for the Mad Hedge Fund Trader?s Global Strategy Update, which I will be conducting in Chicago on Friday, May 23. A three-course lunch will be followed by a PowerPoint presentation and 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 $238.

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 lunch will be held at a downtown Chicago venue on Monroe Street 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.

Chicago

https://www.madhedgefundtrader.com/wp-content/uploads/2013/01/Chicago1.jpg 240 351 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-05 09:28:332014-03-05 09:28:33Chicago Friday, May 23 Global Strategy Luncheon
Mad Hedge Fund Trader

March 4, 2014

Diary, Newsletter, Summary

Global Market Comments
March 4, 2014
Fiat Lux

Featured Trade:
(FRIDAY APRIL 25 SAN FRANCISCO STRATEGY LUNCHEON)
(THE NEW WAR IN THE UKRAINE),
(RSX), (USO), ($BRENT), (WEAT), (UNG), (EEM),
(TIME TO SELL THE TREASURY MARKET SHORT),
(TLT), (TBT)

Market Vectors Russia ETF (RSX)
United States Oil (USO)
Brent Crude OiL-Spot Price(EOD) ICE ($BRENT)
Teucrium Wheat (WEAT)
United States Natural Gas (UNG)
iShares MSCI Emerging Markets (EEM)
iShares 20+ Year Treasury Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-04 01:06:062014-03-04 01:06:06March 4, 2014
Mad Hedge Fund Trader

Friday, April 25 San Francisco Strategy Luncheon

Diary, Lunch, Newsletter

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.

San Francisco

https://www.madhedgefundtrader.com/wp-content/uploads/2013/02/San-Francisco-e1410363065903.jpg 238 359 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-04 01:05:182014-03-04 01:05:18Friday, April 25 San Francisco Strategy Luncheon
Mad Hedge Fund Trader

The New War in the Ukraine

Newsletter

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.

RSX 3-3-14

USO 3-3-14

WEAT 3-3-14

SoldiersA Clever Chess Move?

 

Stolichnaya Vodka

https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Soldiers.jpg 292 430 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-04 01:04:362014-03-04 01:04:36The New War in the Ukraine
Mad Hedge Fund Trader

Time to Sell the Treasury Market Short

Newsletter

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.

TLT 3-3-14

Vladimir PutinSee You a Division, and Raise You a Division

https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Vladimir-Putin.jpg 315 473 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-04 01:03:002014-03-04 01:03:00Time to Sell the Treasury Market Short
Mad Hedge Fund Trader

March 3, 2014

Diary, Newsletter, Summary

Global Market Comments
March 3, 2014
Fiat Lux

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)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-03 01:07:202014-03-03 01:07:20March 3, 2014
Mad Hedge Fund Trader

Friday, April 4 Incline Village, Nevada Global Strategy Luncheon

Diary, Lunch, Newsletter

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.

Lake Tahoe View

https://www.madhedgefundtrader.com/wp-content/uploads/2014/02/Lake-Tahoe-View-e1410283987626.jpg 241 400 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-03 01:06:042014-03-03 01:06:04Friday, April 4 Incline Village, Nevada Global Strategy Luncheon
Mad Hedge Fund Trader

All Asset Class Risk Reversal at Hand

Newsletter

I believe that we are on the verge of seeing major reversals across all asset classes. Get this one right, and you will make a fortune. Screw it up, and you will soon be looking for your next job on Craig?s List.

I understand that there is a desperate need for code writers in the cloud.

As always, I am taking my cue from the bond market. The great anomaly in the financial markets during February was the big divergence between the stock and bond markets.

While it was off to the races for stocks, the S&P 500 rocketing an impressive 7%, bonds didn?t believe it for a nanosecond.

If you had asked any global strategist a month ago where the ten year Treasury yield would be if the (SPX) posted a new all time high at 1,865, to a man they would have said 3.05%. Instead, bonds closed the week at a parsimonious 2.65%.

Something is desperately wrong with this picture.

If it were just bonds blowing a raspberry at this stock rally, I wouldn?t be so concerned. However, both the Euro (FXE) and the Japanese yen (FXY), (YCS) moved from strength to strength. They should be falling in a real bull market for stocks.

Precious metals have also been calling foul. If shares were the new risk free investment, why did gold pop by 9% last month? Better yet, why is silver up a sparkling 18%?

The gold producers have done even better. When Barrick Gold (ABX) soars by 26% in s single month, you?ve got to be worried about the stock market.

So here?s what happens next. With an assist from the Russian takeover of the Ukraine (wasn?t it so polite of them to wait a full week after the Sochi Olympics ended?), bonds take a run at the highs for prices and the low for yields, in the mid 2.50%?s.

This is why Mad Day Trader, Jim Parker, shot out a quick, opportunistic long play in the (TLT) last week. There, they will fail once again, as we are now in the early stages of a multi decade bear market.

This will prompt stocks (SPX) to give up a third to a half of the recent rally, taking it to the bottom of an ascending channel at 1,800 (see below). Volatility (VXX) will spike from the current $12 handle back up to $20. This is why I bought the (SPY) $189 - $192 bear put spread on Thursday, which expires on March 21.

When the bond rally gives up the ghost, shares will resume their 2014 surge. Avoid emerging markets (EEM), because another dump in the bond market knocks the stuffing out of them one more time.

What will the currencies do? This will be the starting gun for great short plays on the yen, which returns to a ten-year bear market, and the Euro, which is just tweaking a three-year high.

In the meantime, the dollar basket ETF (UUP) launches into a multi month rally after putting in a double bottom. I shouldn?t need to draw lurid drawings for you on how to trade this.

As for gold? Sorry in advance to the hard money crowd, the inflationistas, and conspiracy theorists (who cares if Germany wants its gold reserves back from the Federal Reserve?). I think the 2014 rally in the barbarous relic dies a sudden, horrible death, and goes back to retest the $1,200 low one more time, possibly breaking it.

This scenario opens up great entry points across virtually all of the many asset classes that I track. When it?s time to strap on a position, I?ll shoot out Trade Alerts as fast as the speed of electricity permits (186,000 miles per second, or 300 meters per second in Europe).

Yes, I think we will finally get a real 10% correction in stocks going into the summer. But you better be nimble to trade it. My experience tells me that too many of you are selling at market bottoms, not buying.

I just thought you?d like to know.

spy 2-28-14

RSP 2-28-14

TLT 2-28-14

TNX 2-28-14

John Thomas - SnorkelJust Thought You?d Like to Know

https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/John-Thomas-Snorkel.jpg 340 447 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-03-03 01:05:232014-03-03 01:05:23All Asset Class Risk Reversal at Hand
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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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