Transcript www.madhedgefundtrader.com

Please Stand By for
John Thomas
Wednesday, October 10, 2012, San Francisco, CA
Global Trading Dispatch
The Webinar will begin at 12:00 pm EST
The Mad Hedge Fund Trader
“Treading Water”
MHFT Global Strategy Luncheons
Buy tickets at www.madhedgefundtrader.com
2012 Schedule
October 19 Washington DC
October 26 San Francisco
November 7 Houston
November 8 Orlando
January 3, 2013 Chicago
MHFT Global Strategy Luncheons
Buy tickets at www.madhedgefundtrader.com
Washington, DC
October 19
San Francisco
October 26
Trade Alert Performance
New All Time High!
*October MTD +0.39%
*2012 YTD +20.5%, Beating the
Dow by 9.6%
*First 98 weeks of Trading + 60.6%
*Versus +10.9% for the Dow Average
A 49.7% outperformance of the index
87 out of 125 closed trades profitable
69.6% success rate on closed trades
Portfolio Review
Mad Hedge Fund Trader
Trading Book
Asset Class Breakdown
Risk Adjusted Basis
current capital at risk
Risk On
(GLD) $157-$162 Calls Spread
(GLD) $160-$165 Calls Spread
(GOOG) $650-$680 Call spread
(SLV) $28-$31 call spread
(AAPL) $525-$575 call spread
10.00%
10.00%
10.00%
10.00%
10.00%
Risk Off
(SPY) $150-$155 bear put spread
(CORN) $50-$55 put spread
-20.00%
-10.00%
Performance Since Inception-New All Time High
+33.1% Average Annualized Return
Testimonial
I have been religiously following your letter for the past four years. I value your
opinions, knowing they are truly independent and not beholden to a mutual fund or
investment bank. Your ability to recognize, and put out actionable advice during
market extremes is unique in my experience.
Your recent (TLT) long recommendation was a great example. On the heels of the
sharp August sell-off, when CNBC and company worried (TLT) was going to 112 and
points below, you advised going long based on your IRA account suggestions, I chose
the (TLT) October, 2012 $122 calls at $2.76 and then sold them at $4.90 only eight
days later for a 77% profit.
On a related note, I’ve learned a great deal about reducing portfolio complexity, how
to structure and execute conservative trades and manage risk based on your advice
and recommendations. Please keep up the great work!
Regards,
Kevin Murtaugh
Tampa, Florida
The Economy-bad data still coming through
*September nonfarm payroll was huge,
down from 8.1% to 7.8%
*Weekly jobless claims up +4,000 to 367,000
*QE3 earning expectations are very low
*Is Q3 the trough for earnings?
*World Bank downgrades China growth
8.2% to 7.7% 2012, 8.6% to 8.1% in 2013
*IMF says global growth prospects are bleak
*September motor vehicle sales a weak +3.1%,
Toyota down 40% on China trouble
*All consistent with a low 1.5% GDP growth rate,
or lower
German Manufacturing
Why Europe is in a World of Hurt
How long until it spreads to the US?
Weekly Jobless Claims
Trapped in a Sideways Range
Break 400,000 and the rcession threat is on
Bonds-Still churning at the top
*the 1.40% - 1.90% range holds, could be our
range for years
*Look to sell spread spreads outside these ranges
*Is the final top in?
*$40 billion a month in MBS buying
scares investors out of Treasuries
*Record junk issuance continues
(TNX) 1.40%-1.70% Range Holding
(TLT)
Short Treasuries (TBT)
See the 1:4 reverse Split
Junk Bonds (HYG)
Municipal Bonds (MUB)-3% yield,
Mix of AAA, AA, and A rated bonds
Stocks-The Gridlocked Market
*Buyers and sellers have gridlocked market
*QE3 raises the floor below stocks, but they won’t
rise much either
*Instead of a Dow 10,000 floor, it is more
like 12,000, the June low
*$10 trillion in cash sitting in US bank accounts
*$390 billion in stock buy backs
supporting market
*Romney bump in polls hurts all “RISK ON”
assets. No Obama means no Bernanke
means no QE
*Investors still chasing yield
(SPY)-Did we just get a double top?
Is the (IWM) warning us of trouble?
Buy the November, 2012 (SPY) $150-$155 Bear Put Spread
20% Portfolio Weighting
Buy 23 November, 2012 $155 puts at………..…….$9.66
Sell short 23 November, 2012 $150 puts at…….$5.22
Net cost……………………………………………..………….$4.38
23 contracts for a 10% weighting in the model $100,000 portfolio
Profit: $5.00 - $4.38 = $0.62
(23 X $0.62 X 100) = $1,426 = 1.43% return
Profitable with the (SPY) at all points below $150.62,
(SPY) now at $146.4
Short (SPY) 12/$150-$155 Put Spread
(QQQ)-NASDAQ
(VIX)-Going to sleep
(AAPL)-Long the 1/$525-575 Call spread
buy this dip
(GOOG)Long the December $650-$680 Call Spread
(FCX)
(CAT)
(BAC)-augurs for double top scenario
Russell 2000 (IWM)
Shanghai-Not yet for the double bottom
My Post Fed Shopping List
Stocks to buy on the dip
November, December, January Deep in-the-money Calls Spreads
Apple (AAPL)
Google (GOOG)
Disney (DIS)
JP Morgan (JPM)
Boeing (BA)
Merck (MRK)
The Dollar
*QE3 is hugely dollar negative
*Euro is rolling over again
*Missed the Euro short at $1.32
*Yen is still stagnating, getting
a weak dollar push-BOJ says no QE
*Ausie rolled over once again on
weak China market
*The competitive devaluation is on,
the race to the bottom
Long Dollar Basket (UUP)
Close to the May bottom
Euro (FXE)
Australian Dollar (FXA)
Heartbreak Alert!
Japanese Yen (FXY)
Look to sell $127-$130 September call spread again
(YCS)
Bailed at the Top
Energy-sell oil rallies with (USO) put spreads
*Israeli PM asks for snap election
a vote for war?
*Iraq-Turkey pipeline bombed
is a 1 million b/d pipeline
*US sending troops to Jordan-Syria border
*Go short on every way rumor, Israeli
intelligence told me they will wait until next
summer to see if Iran sanctions work
*Oversupply is overwhelming demand
*Slowing China is a big factor
*Futures structure says that prices are headed lower
*Huge short cover in natural gas, rising at the
expense of coal, rumor Obama will ban fracking if elected
Crude-waiting for QE3
(USO)
Natural Gas
Copper (CU)-China bounce
Precious Metals-Run longs in limited risk positions
Long (GLD) 12/$157-$162 Bull call spread
Long (GLD) 12/$160-$165 Bull call spread
Long (SLV) 12/$28-$31 Bull call spread
*”RISK OFF” hits the precious metals
*Traders selling big winners going into year end
*The sideways chop scenario is still on
*Emerging market central bank buying is continuing
*Romney bump in polls is triggering profit taking
in precious metals. No Obama means no Bernanke
means no QE
Gold-long the December $157-$162 call spread
long the December $160-$165 call spread
Silver-long the December $28-31 call spread
(Platinum) (PPLT)
Palladium (PALL)
The Ags
long the (CORN) 11/$50-$55 bear put spread
*Charts are clearly rolling over
*Trade is out of season
*No Major Dept. of Agriculture reports due
*Summer Draught boosted prices to
very high levels
*From hear on extreme weather affects
next year’s crop, not this year’s
*Obama win means ethanol subsidy
become a big target, is 40% of US
corn consumption
*Is a short term trade only
(CORN)
Soybeans (SOYB)
Real Estate
No longer a drag, but a modest positive
Rally will end when recession hits in 2013
“Twist” was extended to mortgage backed securities.
The 30 year fixed has plunged from 3.75% to 3.40%, lower to come
Trade Sheet
The bottom line: Wait for the Fed
*Stocks- stand aside, wait for correction to finish
*Bonds- sell rallies over a 1.50% yield
*Commodities-short oil, stand aside related China commodities
*Currencies- sell next big rally
*Precious Metals – buy the dips aggressively, loves QE3
*Volatility-stand aside, will bounce along bottom
*The ags – stand aside, has gone dead
*Real estate- rent, don’t buy
Next Webinar is on Wednesday, October 24
12:00 noon EST from San Francisco, California
To buy strategy luncheon tickets Please Go to
www.madhedgefundtrader.com