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Mad Hedge Fund Trader

A Touchdown for USC

Diary, Newsletter

One of my many alma maters, the University of Southern California, announced that they had received their largest private donation ever. As a third generation alumni of this fanatical football factory (I went to school with Mark Harmon, Lynn Swan, and, oops, OJ Simpson), I still receive their alumni newsletter, where I learned the good news.

David and Dana Dornsife gave $200 million to the downtown Los Angeles home of the Trojans. The money has been used to fund the College of Letters, Arts and Sciences, which has been renamed after them.

Dornsife made his fortune as the owner of Herrick Corp., a Stockton based maker of the prefabricated steel that was used to build many of the skyscrapers in the center of Los Angeles.

The gift tops the university's previous largest gift from George Lucas, of Star Wars fame, who in 2006 contributed $175 million to USC's film school, which he once attended with another legendary director, Steven Spielberg.

For the record, the largest charitable contribution to a university in history was the $600 million that Gordon Moore, of Moore?s Law fame and a founder of Intel (INTC), gave Caltech in nearby Pasadena. As a teenager, I used to sit in on the math classes there. Notice that all of these big donations to education are happening in California.

Tommy Trojan will no doubt be happy, provided that a Bruin from UCLA has not stolen his sword again, or painted him blue. And don?t ask me about ?Old Tire Biter.?

David and Dana Dornsife

https://www.madhedgefundtrader.com/wp-content/uploads/2013/03/David-and-Dana-Dornsife.jpg 199 264 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-02-10 01:03:592014-02-10 01:03:59A Touchdown for USC
Mad Hedge Fund Trader

February 7, 2014

Diary, Newsletter, Summary

Global Market Comments
February 7, 2014
Fiat Lux

Featured Trade:
(TAKING OFF FOR THE ANTIPODES),
(SATURDAY FEBRUARY 22 BRISBANE AUSTRALIA STRATEGY LUNCH),
(TESTIMONIAL)

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 Trader2014-02-07 01:06:312014-02-07 01:06:31February 7, 2014
Mad Hedge Fund Trader

Taking off for the Antipodes

Diary, Newsletter

I will be departing for my Mad Hedge Fund Trader?s 2014 Australia and New Zealand tour as soon as I finish writing today?s letter. During the next 18 days, I will fly 22,000 miles, dining with my abundance of readers in the southern hemisphere.

I am leaving you in good hands with a clean conscience. The markets graciously allowed me to exit my three remaining positions with nice profits, placing readers in the enviable position of being up +5.42% for the month of February, 8.46% year to date, and up +130.96% since inception. This was during a period when the Dow Average dove a ferocious 7.6%.

All 13 new Trade Alerts issued so far in 2014 have been profitable. The one loser we realized, in Softbank (SFTBY) shares, was carried over from 2013.

Hard earned experience has taught me that reaching for more than this in these troubled, volatile, and unpredictable times could result in my hand getting chopped off. Better to continue on the year with all ten digits intact, so as to type the Trade Alerts faster.

I will be meeting the CEO?s of major multinationals, the heads of sovereign wealth funds, senior officials at ministries of finance and central banks, and, of course, lots of hedge fund managers.

These meetings are extremely helpful in updating my view on all asset classes, as well as getting a real time read on the state of the global economy. You will be the direct beneficiaries of any insights I may glean, as they will directly translate into new, profitable trades upon my return to America.

Until then, I will be rerunning my favorite pieces from past letters, which have been updated for market relevance and accuracy. Thousands of new subscribers have recently joined the Mad Hedge Fund Trader community and will be reading them for the first time. Many of the rest of you were either too busy to catch them the first time, or completely forgot them.

I doubt that I will be issuing any new Trade Alerts during my trip. With these incredibly volatile market conditions, you have to be glued to your screen at all times, or you are toast. In Australia the New York market opens at 1:30 AM and closes at 8:00 AM local time. Given my packed schedule of strategies luncheons and speaking engagements, I really need a full night of sleep to carry it off.

Quite honestly, I am also getting kind of tired and can use a rest. Over the past two months, not only did I keep up my 1,500 word a day torrent of ideas and opinion, I also managed to pump out 44 trade alerts, nearly all of which made money.

This workload would crush most 30 year olds, and I just turned 62. Maybe I can catch some shuteye during the 45 hours that I will be spending on planes over the blue Pacific.

During my off hours, I will be mountain climbing on New Zealand?s North Island, where the Lord of the Rings trilogy was filmed, surfing on the western beaches, going wave hopping while piloting a small plane along the coast of New South Wales, and diving off a small coral island on the Great Barrier Reef.

My business strategy towards life has always been to under promise and over deliver. I believe that I have done this in spades with the Trade Alert mentoring program.

Not a day goes by without an email from a satisfied subscriber telling me that I have paid for a college education, a loved one?s chemotherapy, or given new meaning to long, but tired careers. Coming at a time in my life when there are clearly more years behind me than ahead, when the hike has fewer miles ahead than behind, they make it all worth it. Please keep them, coming.

Well, I?ve got to finish my packing, as the limo will arrive shortly. New Zealand and Australia are 220-volt countries, but don?t use the same plugs as England. So I dove into my voluminous bag of international power adapters and think I found the right ones. I?ve turned off the heat and the hot water, plugged in the Tesla, and took the battery out of the Toyota. I put the mail on old and gave all of my perishable food to my kids. It?s time to go.

If you wish to join me at any of the lunches, there are still tickets available for sale for all. Just go to my store. Here is the schedule:

Auckland, New Zealand - Wednesday, February 12
Sydney, Australia - Friday, February 14
Melbourne, Australia - Thursday, February 20
Brisbane, Australia - Monday, February 22

See you there

John Thomas
The Mad Hedge Fund Trader

John Thomas-Sydney

https://www.madhedgefundtrader.com/wp-content/uploads/2014/02/John-Thomas-Sydney.jpg 338 449 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-02-07 01:05:032014-02-07 01:05:03Taking off for the Antipodes
Mad Hedge Fund Trader

February 6, 2014

Diary, Newsletter, Summary

Global Market Comments
February 6, 2014
Fiat Lux

Featured Trade:
(THURSDAY FEBRUARY 20 MELBOURNE, AUSTRALIA STRATEGY LUNCH)
(MAD HEDGE FUND TRADER SURGES AHEAD WITH A 5.78%),
(TLT), (UNG), (AAPL)
(DINNER WITH ELIOT SPITZER)

iShares 20+ Year Treasury Bond (TLT)
United States Natural Gas (UNG)
Apple Inc. (AAPL)

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 Trader2014-02-06 01:06:382014-02-06 01:06:38February 6, 2014
Mad Hedge Fund Trader

Mad Hedge Fund Trader Rockets Ahead With a 6.49% January Profit

Diary, Newsletter

The red hot performance of the Mad Hedge Fund Trader?s Trade Alert Service has maintained its blistering pace from last year, picking up another 6.49% profit in the first two trading weeks of 2014.

The Dow Average was down 6.2% during the same period pegging my outperformance of the index at a stunning 12.7%. Since the beginning of 2013, I am up 77%. 2013 closed with a total return for followers of 67.45%.

The three-year return is now an eye popping 132%, compared to a far more modest increase for the Dow Average during the same period of only 26%. That brings my averaged annualized return up to 41.7%.

This has been the profit since my groundbreaking trade mentoring service was launched in 2010. It all is a matter of the harder I work, the luckier I get.

The hot streak continues.

The smartest thing I did in the past year was to let all of my options expire on January 15, and then moved to an 80% cash position. That spared me the angst, the soul searching, and the sleepless night caused by the 10% correction that followed in the Dow Average.

This set me up to cherry pick the most extreme market moves. But this time was different. Instead of returning to call spreads, I adopted an outright put option strategy.

This allowed me to pick up highly leveraged short positions in Treasury bonds and natural gas, while risking only 5% of my capital with each. Don?t people know that polar vortexes only come in pairs? I guess no one studies physics anymore. When the markets broke, a sharp rise in volatility also contributed to the P&L.

To top it all, Steve Jobs chipped in again, even though he has been dead for 2 ? years. My call spread in Apple shares PROFITABLY came home once more.

My esteemed colleague, Mad Day Trader Jim Parker, had no small part of this success. Since the market became technically and momentum driven, I have been confirming with him before sending out every Trade Alert. Together, out success rate is 100%.

What would you expect with a combined 85 years of market experience between the two of us? Followers are laughing all the way to the bank.

Don?t forget that Jim clocked an amazing 2013 staggering 374%. That is just for an eight-month year!
The coming year 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. You will never get a better chance than this to make money for your personal account.

Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011, 14.87% in 2012, and 67.45% in 2013.

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 blue ?SUBSCRIBE NOW? button.

TA Performance

John Thomas - Skis

https://www.madhedgefundtrader.com/wp-content/uploads/2014/02/John-Thomas-Skis.jpg 457 313 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-02-06 01:04:232014-02-06 01:04:23Mad Hedge Fund Trader Rockets Ahead With a 6.49% January Profit
Mad Hedge Fund Trader

February 5, 2014

Diary, Newsletter, Summary

Global Market Comments
February 5, 2014
Fiat Lux

Featured Trade:
(FRIDAY FEBRUARY 14 SYDNEY, AUSTRALIA STRATEGY LUNCH),
(THREE CHARTS THAT WILL TURN THE MARKETS),
(TLT), (TBT), (FXY), (YCS), (SPX), (BAC), (C), (GLD),
(GRAPES OF WRATH REDUX),
(TESTIMONIAL)

iShares 20+ Year Treasury Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
CurrencyShares Japanese Yen Trust (FXY)
ProShares UltraShort Yen (YCS)
S&P 500 Index (SPX)
Bank of America Corporation (BAC)
Citigroup Inc. (C)
SPDR Gold Shares (GLD)

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 Trader2014-02-05 01:07:092014-02-05 01:07:09February 5, 2014
Mad Hedge Fund Trader

Three Charts That Will Turn the Markets

Newsletter

I wrote at length yesterday about why this is not a new bear market, but a traditional 7%-10% correction instead. Now, I?ll show you three charts that will call the exact turnaround.

The ten-year Treasury bond (TLT), (TBT) is clearly the lead contract. It has, far and away, been the most accurate in anticipating the future direction of all asset classes. Get this one right, and everything else falls into line.

Take a look at the chart for the (TLT) below, which has clearly broken the 200 day moving average. I think that this is a false breakout, and that we are not trading in a new $108-$112 trading range that prevailed last spring. Note that while the 200-day average is busted, the 200-week is still putting up fierce resistance. This may well be the line in the sand that counts.

Next, take a look at the chart for the Japanese yen (FXY), (YCS). This is crucial because the yen is the world?s funding currency, thanks to its zero interest rates. When traders are in ?RISK OFF? MODE, they dump their positions in all asset classes and buy yen to repay their broker loans. This forces the yen to appreciate against the US dollar, something the Japanese government is loathe to seeing. This occurs on a scale of trillions of dollars.

When investors throw caution to the wind and pile back into ?RISK ON? portfolios, the reverse happens. They borrow yen and sell them to finance new positions, sending the yen down. Weakness in the yen is therefore the first place you will see a recovery in global markets.

The yen chart bellows shows that it is taking a run at its 200 day moving average at $97.91. That is only $1.70 up from here, and in line with ?100 to the dollar in the cash market, another important resistance level.

My expectation is that the yen will fail here and return to its longer-term downtrend, bringing a major 6% rally against the greenback to an end. That will send a great flashing green light to traders that the buyers strike is over and that its time to get back to work.

You see a very similar inverse chart with the S&P 500 (SPX). The bottom here also appears to be the 200 day moving average at 1,708, a mere 32 points below today?s low. That is only one bad day away. Watch for a rally from here to trigger simultaneous sell offs in the Treasury bond and yen markets.

You can play this game all day long. A confirming move of a top in interest rates would be a big rally in bank shares, which need higher interest rates to make more money. So keep a laser focus on Bank of America (BAC) and Citigroup (C). At the same time, gold (GLD) will once again get thrown out with the trash, since higher rates punish holders here with a greater opportunity cost.

This all may happen sooner than you think. The Friday January nonfarm payroll neatly sets up a double top in the volatility index at $21. Get a good number, like over 200,000, and see substantial back month revisions up, and volatility will collapse back to the mid teens. Everything else I described above will come to pass.

However, I won?t find out what transpired until Saturday. When the Department of Labor releases the anxiously awaited report, I should be fast asleep in my first class cabin somewhere over French Polynesia on my way to New Zealand. Send me an email on what happens.

TLT 2-4-14 a

TLT 2-4-14 b

FXY 2-4-14

SPX 2-4-14

VIX 2-4-14

Hula GirlsThe Nonfarm What?

https://www.madhedgefundtrader.com/wp-content/uploads/2014/02/Hula-Girls.jpg 269 409 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2014-02-05 01:05:332014-02-05 01:05:33Three Charts That Will Turn the Markets
Mad Hedge Fund Trader

February 4, 2014

Diary, Newsletter, Summary

Global Market Comments
February 4, 2014
Fiat Lux

Featured Trade:
(THREE CORRECTIONS FOR THE PRICE OF ONE),
(TLT), (TBT), (SPY),
(CHINA?S VIEW OF CHINA),
(FXI), (EEM)
(FEBRUARY 12 AUCKLAND NEW ZEALND STRATEGY LUNCH)

iShares 20+ Year Treasury Bond (TLT)
ProShares UltraShort 20+ Year Treasury (TBT)
SPDR S&P 500 (SPY)
iShares China Large-Cap (FXI)
iShares MSCI Emerging Markets (EEM)

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 Trader2014-02-04 01:06:032014-02-04 01:06:03February 4, 2014
Mad Hedge Fund Trader

Three Corrections for the Price of One

Newsletter

I love this market action. For me, it means that we are setting up ideal entry points for a broad range of asset classes that will deliver another +67% year.

It will set up for you too, if you continue to read this letter.

What the market is in fact doing is giving us three corrections for the price of one. Remember the traditional September swoon that never happened, the worst trading month of the year? How about the forgotten ritual October crash? And the November dip that always precedes the December yearend rally?

Well guess what? After forgetting how to go down for the longest period of time, we are getting all three downturns compressed into a single big one. That will give us a start finish decline of 7.2% in the (SPX) down to 1730, in line with every correction of the past two years (see chart below), and worst case the proverbial 10% textbook correction.

If my assumptions are correct, then in a worst-case scenario we are already 75% through this pullback on a price basis, and 65% on a time basis. Needless to say, selling short stocks here is out of the question. That train left the station at New Years.

After sitting on my hands, shuffling the papers around my desk several times, and going for my umpteenth coffee refill, I finally pulled the trigger on my iShares Barclays 20+ Year Treasury Bond Fund June, 2014 $106 puts trade. It finally entered no brainer territory.

It hit me what had been driving markets this year, but it took a ten-pound sledgehammer to do it.

Bonds have had it absolutely right this year. They took off right out of the gate on January 2 and never looked back.

Stocks on the other hand have been much more confused and disoriented, like an airplane pilot doing aerobatics on Instrument Flight Rules. They initially rose a little bit, right along with bonds, which almost never happens. You knew that wasn?t going to last.

Then they flat lined for two weeks. It took almost a month before traders realized that the punch bowl was gone and it was time to head into ?RISK OFF? mode. The tardy call can be traced to the fact that you calculate your average stock traders? IQ by taking a bond trader?s and then dividing by two.

What all this means is that the bond market has been correctly calling market direction two weeks before the stock market has. This is bound to continue.

There is another factor to consider here. Bond traders have now seen a whopping great eight point rally in a month, taking the yield on the ten year Treasury bond down a massive 45 basis points, from 3.05% to 2.61%. That is just too much profit to sit on.

That is a world ending performance for bonds. Except that Armageddon, it is not. So the pros that got this one right are increasingly going to be sellers on rallies from here on.

Don?t forget that the Federal Reserve will probably continue to knock $10 billion off of its quantitative easing program every six weeks if the economic data continues to come in, as I expect. That could drop its monthly bond purchases from $85 billion a month in December to only $35 billion by June. This is not good for the (TLT). It?s nice to see all of those lunches at the Federal Reserve Bank of San Francisco with the new chairman, Janet Yellen, finally paying off.

If I am wrong on this one, it will be only by a couple of basis points, with the ten year possibly making it to the high 2.50%?s. The global synchronized economic recovery is still on schedule. The economic data and corporate earnings are just too good to see yields drop to 2.50% or lower.

Bull markets don?t die of old age, they die from recessions, and there is absolutely none on the horizon. The weakness in emerging markets is happening because some of their growth is moving back to the US. That is bad for them and great for us. I never liked their food anyway.

Markets also don?t peak at the middle of historic valuation range of 9-22. We are now at 14.5 if the $120/share earnings forecast for 2014 is good.

Profit margins are at all time highs, and rising (see chart below). The heart-rending volatility we have seen so far in 2014 is therefore technical in nature, and not fundamentally driven. It is just a matter of a few days or weeks until the fundamentals reassert themselves, as they always do.

Strip out the drag of government spending, and the private sector is growing at a positively meteoric 5.1% annual rate.

That could happen as early as Friday, when a blockbuster nonfarm payroll is expected to hit. The shocking 84,000 December number reported in January was a weather driven anomaly. Expect this week?s January figure to come in strong, as well as providing big upward revisions to the December report.

Which brings me to the iShares Barclays 20+ Year Treasury Bond Fund June, 2014 $106 put. Only a global synchronized recession would prevent the (TLT) from trading below $103.58, my breakeven point on an expiration basis, over the next five months. Those who can?t buy options can substitute the ProShares Ultra Short 20+ Treasury ETF (TBT) instead.

If the (TLT) makes it back to unchanged on the year at $101 by the June 20 expiration, this position will be up $5,418, or $5.41% for our notional $100,000 portfolio. If it makes it down to $101 sooner, we will make even more money, as there will still put some remaining time value in the put option.

That is up 108% from my initial cost. For that I am willing to take a few basis points of heat for a few days or weeks. It is an ideal buy and hold position, like, for example, you were just about to take a long trip to New Zealand and Australia.

Sounds like a no brainer to me!

Markets Chart of the Day 1-30-14

SPX 1-31-14

TLT 2-3-14

TBT 2-3-14

fat+lady+singsThe Fat Lady is Singing for the Bond Market

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 Trader2014-02-04 01:05:212014-02-04 01:05:21Three Corrections for the Price of One
Mad Hedge Fund Trader

February 3, 2014

Diary, Newsletter, Summary

Global Market Comments
February 3, 2014
Fiat Lux

Featured Trade:

(FEBRUARY 5 GLOBAL STRATEGY WEBINAR),
(NOW WE?RE COOKING WITH GAS),
(AMERICA?S DEMOGRAPHIC TIME BOMB),
(TESTIMONIAL)

 

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 Trader2014-02-03 01:07:002014-02-03 01:07:00February 3, 2014
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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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