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Douglas Davenport

A Tribute to a True Veteran

Diary, Newsletter, Research
Today is a good day to tell you the story of my Uncle Mitch.
I'll be putting on my faded Marine Corp fatigues, with gold railroad track bars on my shoulders, and leading the hometown's parade.

Since job prospects for high school graduates in rural Pennsylvania in 1936 were poor, Mitch walked 200 miles to the nearest Marine Corp recruiting station in Baltimore.

After basic training, he spent five years rotating between duty in China and the Philippines, manning the fabled gunboats up the Yangtze River.

When WWII broke out, he was a seasoned sergeant in charge of a machine gun platoon. That put him with the seventh regiment of the First Marine division at Guadalcanal in October, 1942.

When the Japanese counterattacked, Mitch was put in charge of four Browning .30 caliber water-cooled machine guns and 33 men, dug in at trenches on a ridge above Henderson Field.

The Japanese launched massive waves of suicide attackers in a pouring tropical rainstorm all night long, frequently breaking through the line and engaging in fierce hand-to-hand combat.

If the position fell, the flank would have been broken, leading to a loss of the airfield, and possibly the entire battle. WWII would have lasted two more years.

After the first hour, all of Mitch's men were either dead or severely wounded, shot or slashed with samurai swords.

So Mitch fired one gun until it was empty, then scurried over to the next, and then the next. In between human waves, he ran back and reloaded all the guns.

To more easily pitch hand grenades, he cut the arms off his herringbone fatigues. When the Japanese launched their final assault, and then retreated, he picked up a 40-pound Browning and ran down the hill after them, firing all the way, and burning all the skin off his left forearm.

Mitch's commanding officer, Col. Herman H. Hanneken, heard the guns firing all night from the field below.

He was shocked when he visited the position the next morning, finding Mitch alone in front of a twisted sea of 1,000 Japanese bodies, not a scratch on him.

Mitch was awarded the Congressional Medal of Honor in Australia a few months later.
Henderson's Ridge 1942

Henderson's Ridge in 1942

Medal of Honor

After the war, Mitch, now a colonel, was handed the plum of all Marine Corp jobs, acting as the liaison officer with Hollywood. He provided the planes, ships, and beaches needed to make the great classic war films. He got to know stars like John Wayne, Lee Marvin, and yes, even Elvis Presley.

The iconic fictional hero in the 1949 film, Sands of Iwo Jima, Sergeant John M. Striker, was modeled after Mitch.

Tradition dictated that all military officers salute Mitch, even five star generals, and he was given a seat to attend every presidential inauguration from FDR on. Pacific countries issued stamps with his image, and Mattel sold a special GI Joe in his likeness.

When Mitch got older and infirm, I used my captain's rank to escort him on diplomatic missions overseas to attend important events, like the 40th anniversary of D-Day in Normandy.

Whenever Mitch was in town, he would join me for lunch with some of my clients with a history bent, and a more humble and self-effacing guy you never met. Mitch passed away in 2003 while he was working as a technical consultant for the pre-production of the HBO series, The Pacific. The funeral in Riverside, California was marked by an eagle continuously circling overhead which, according to the Indian shaman present, only occurs at the services for great warriors.

When I got back from the parade, I took out the samurai sword Mitch captured on that fateful day, a 1692 Muneshige, the hilt still scarred with 30-caliber slugs, and gave it a ritual polishing in sesame oil and powdered deer horn, as samurai have done for millennia.

To learn more about the First Marine Division's campaign during the war, please read the excellent paperback, The Island: A History of the First Marine Division on Guadalcanal by Herbert Laing Merillat, which you can buy from Amazon by clicking on the title.

The Island

Guadalcanal Patch

https://www.madhedgefundtrader.com/wp-content/uploads/2013/05/Hendersons-Ridge-1942-e1415714728740.jpg 251 400 Douglas Davenport https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Douglas Davenport2017-11-10 01:06:212017-11-10 01:06:21A Tribute to a True Veteran
Arthur Henry

November 9, 2017

Diary, Newsletter, Summary

 

Global Market Comments
November 9, 2017
Fiat Lux

Featured Trade:
(NOVEMBER 8 2017 GLOBAL STRATEGY WEBINAR Q&A),
(TAKE A RIDE IN THE NEW SHORT JUNK ETF),
(THE COOLEST TOMBSTONE CONTEST)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Arthur Henry https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Arthur Henry2017-11-09 01:09:232017-11-09 01:09:23November 9, 2017
Arthur Henry

November 8, 2017 Global Strategy Webinar Viewer Q&A

Diary, Newsletter

Below please find a transcription of the viewer questions that popped up in my chat box during the November 8 Global Strategy Webinar, along with my answers.

If you find this useful please email Nancy in Customer Support at support@madhedgefundtrader.com and we will make it a regular feature of the service. Just put "Webinar Questions" in the subject line.

John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader

1) What do you see for the banks?
Jim

They are totally slaved to the interest rate outlook, and I expect interest rates to bottom right around here. If you get another spike up in interest rates, the banks will take off like a rocket and go up for 3 more years. I still see a double in the banks.

2) Would you touch Wells Fargo?
Bill

I like Wells Fargo the most because you have a huge number of scandals built into the price now, and they really have run out of scandals. All you need is all quiet on the Western Front for a little bit and the stock will catch up with the rest of the banking sector.

3) Is biotech a long term buy?
Steve

Absolutely! If you only have to pick 2 sectors and forget everything else that's going to be technology and biotech.

4) Will tech perform well next year?
Doug

Answer, yes but only expect to get 1/3 to 1/2 the gains that we saw this year. Stock prices have run way ahead of earnings and we need earnings to catch up with share prices, so that is why I am saying rotate out of tech, but only for the short term. Long term, tech will be the top performing sector for the next 20 years.

5) What is going on with Tesla?
Matthew

This is a very difficult stock to trade. My inclination is wait for it to test $280 and then buy it with both hands. They are now at their maximum spend to create a 500,000 a year rate assembly line. So big cash drawdowns this quarter, probably again next quarter, are to be expected. After that we probably get to see the actual numbers that the investment in production will create.

6) Is it life or death on taxes for the Republicans?
Bart

Yes Bart, I would agree on that. If they can't get a tax package through next year we are looking at an all Democratic congress in November 2018, and we are already seeing a preview on that with the Democratic win in the Virginia and New Jersey governor's races yesterday.

7) Could change in the Fed chair also change the QE status, i.e. no bond sales?
George

The answer is yes. It could change if they postpone QE, bonds will rocket, yields would collapse and the stock market would continue rising for another year. That has always been a risk with a new Fed governor if he superheats the economy to try and get the 4% growth rate that the President promised in the campaign. So you cannot rule that out. It's unlikely, because stimulus is not needed now with stocks delivering their best year in decades. Corporate profits at all-time highs, unemployment at 20 year lows signal no need for further Fed stimulus. But you never know with this President.

8) John, would you buy TBT at these levels?
Joseph

It's a screaming buy. In fact, as soon as I finish with this webinar, I'm going to buy more (TBT).

9) Will the strong dollar hurt emerging markets as they try to pay off debt in US dollars?
Jim

Yes, it will. In fact, it could trigger a few trillion dollar's worth of defaults, which we have seen in past cycles because emerging market companies have almost all their debt in US dollars. This means the value of their debt increases just through currency appreciation.

10) What do you think Applied Materials?
Matt

I'd be a buyer on the dips. I think the artificial intelligence boom goes for several more years. Certainly, until the end of this bull market which is 18 more months.

11) Is it time to take profits on home builders?
Doug

I'd say no. Here's your big trade on home builders. If they cut out the loss of deductibility of local taxes and mortgage interest then the housing sector takes off like a rocket. That's going to be a big 2018 trade, so that is why you want to watch this sector. If you already have the home builders, I would probably hang on to them depending on what your risk tolerance is.

12) What do you think of GE?
Andrew

No way to tell if this is bottoming, but it could be a big 2018 trade. Classic Dog of the Dow situation.

13) Am I late to buy energy now?
Renee

I do think it is late on energy. They were getting thrown out with the bath water for most of this year. It just had a monster run. I would rather go out and short treasury bonds, short the Euro, short the Japanese yen, and buy gold on bigger dips. At this point, buying an energy name is at the bottom of the list.

14) Any thought on buying VIX calls as insurance?
Michael

You can do that Michael, but it is very expensive. We did this in October and it ended up eating up 3/4 of my performance for the month with only a 5% weighting. We bought (VIX) calls with the (VXX) at $40 and it went to $34. Ouch! The value of our call options dropped by half. Remember, in the (VXX) you have giant contango that guarantee about a 40% a year loss in any long position, so you are trying to trade against that. It really is a classic catching a falling knife situation.

15) Should i buy tech laggards?
Thomas

If you're going to be in tech then you might as well go with the Gucci stocks, and those are the FANG's. That's what people want to buy. Those are still cheap relative to the rest of the market, rather than chasing these marginal names like (SNAP) that have had monster sell offs.

https://www.madhedgefundtrader.com/wp-content/uploads/2017/11/tahoe-john-e1510179331854.jpg 400 300 Arthur Henry https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Arthur Henry2017-11-09 01:08:552017-11-09 01:08:55November 8, 2017 Global Strategy Webinar Viewer Q&A
Mad Hedge Fund Trader

The Coolest Tombstone Contest

Diary, Newsletter

To prove that The Diary of a Mad Hedge Fund Trader only deals with the highest quality, top drawer clientele, I want to share the picture below sent in by a subscriber.

Tombstone

https://www.madhedgefundtrader.com/wp-content/uploads/2013/09/Tombstone.jpg 687 442 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2017-11-09 01:06:252017-11-09 01:06:25The Coolest Tombstone Contest
Arthur Henry

November 8, 2017

Diary, Newsletter, Summary

Global Market Comments
November 8, 2017
Fiat Lux

Featured Trade:
(BEHOLD THE POWER OF THE LEAP!),
(TLT), (TBT), ($TNX),
(EUROPEAN STYLE HOMELAND SECURITY),
(TESTIMONIAL)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Arthur Henry https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Arthur Henry2017-11-08 01:09:432017-11-08 01:09:43November 8, 2017
Arthur Henry

Behold the Power of the Leap!

Diary, Newsletter

The recent 4 1/2 point jump in the US Treasury bond market has just given us another chance at the brass ring.

Except that this time, it's different.

Now we have a technical picture that is also setting up an almost perfect head and should top on the charts.

How would you like to get some free lottery tickets?

Except that these are better than lottery tickets.

Instead of a one in a million chance of winning some substantial dough, the odds of a big payoff are more like 90:10.

Have I piqued your interest? Are you ready to take a flier? Do you feel like rolling the dice?

And here's another come-on.

The last time I recommended this exact trade in August followers earned an eye-popping 50% return on capital in only four weeks!

It's really quite simple.

This morning, the yield on the ten-year Treasury bond briefly touched 2.29%, a new three month low.

Let's say that's the low for the year, and that yields rise from here for the next four months, pummeling the bond market.

This would be a fabulous time to buy a long dated (TLT) March 2018 $123-$125 out-of the-money vertical bear put spread at $1.00.

If bond yields back up to 2.45% where they were two weeks ago and shave five points off the (TLT) from today's levels, this spread would expire at its maximum theoretical value at $2.00 on March 16, 2018.

The profit on a $10,000 investment would amount to (100 contracts X 100 shares per option X $1.00), or $10,000, giving you a four-month gain of 100%.

Not bad in this yield deprived world.

Please see the screen shot from my Interactive Brokers platform to see how to set up this position.

Now let's say you have a prodigious appetite for risk and want to spend some of the massive profits you earned following the Diary of a Mad Hedge Fund Trader in recent months.

Let's say that you are willing to bet that bond yield are likely to back all the way up to the 2.62% where they traded in March.

In that case, you want to buy the (TLT) March 2018 $116-$118 deep out of-the-money vertical bear put spread at $0.28.

If you are correct, and bond yields back up to a lofty 2.62% and cut 11 points off the (TLT) from today's levels, this spread would expire at its maximum theoretical value of $2.00 on March 16, 2018.

The profit on a $10,000 investment would amount to (356 contracts X 100 shares per option X $1.72), or $61,232, giving you a four-month gain of 512.32%.

Please see the screen shot from my Interactive Brokers platform to see how to set up this much more aggressive high-risk position.

If you add either one of these super aggressive positions you are making a number of different bets.

1) The global synchronized economic recovery continues.

2) Jerome Powell, the next Fed governor, will continue with Janet Yellen's policy of raising interest rates 25 basis points per quarter.

3) Pernicious deflation moderates, thanks to the large scale recovery spending wrought by Hurricanes Harvey in Texas and Irma in Florida and the fires in Northern California.

4) Some kind of tax cut gets passed by congress within the next four months, no matter how modest.

These may not be bets that you are willing to make with your own hard earned cash.

But if they are, the potential payoff is enormous, a lot like winning the lottery.

I am not necessarily saying this is going to happen with any certainty.

Nevermind that every financial guru out there, including Warren Buffet, Ray Dalio, David Tepper, and George Soros agree with me and argue vociferously that bonds are wildly over priced, at a bubble top, and long overdue for a huge fall.

So far, they have all been wrong, including me.

I'm just sayin...

Here's the Brass Ring Trade for the Rest of 2017

https://www.madhedgefundtrader.com/wp-content/uploads/2017/11/child.jpg 215 331 Arthur Henry https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Arthur Henry2017-11-08 01:08:312017-11-08 01:08:31Behold the Power of the Leap!
Mad Hedge Fund Trader

European Style Homeland Security

Diary, Newsletter

The English are feeling the pinch in relation to recent geopolitical events, and have therefore raised their security level from "Miffed" to "Peeved."

Soon, though, security levels may be raised yet again to "Irritated" or even "A Bit Cross." The English have not been "A Bit Cross" since the blitz in 1940, when tea supplies nearly ran out.

Terrorists have been re-categorized from "Tiresome" to "A Bloody Nuisance." The last time the British issued a "Bloody Nuisance" warning level was in 1588, when threatened by the Spanish Armada.

The Scots have raised their threat level from "Pissed Off" to "Let's get the
Bastards." They don't have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.

The French government announced yesterday that it has raised its terror alert
level from "Run" to "Hide." The only two higher levels in France are "Collaborate" and "Surrender." The rise was precipitated by a recent fire that destroyed France's white flag factory, effectively paralyzing the country's military capability.

Italy has increased the alert level from "Shout Loudly and Excitedly" to
"Elaborate Military Posturing." Two more levels remain: "Ineffective Combat Operations" and "Change Sides."

The Germans have increased their alert state from "Disdainful Arrogance" to
"Dress in Uniform and Sing Marching Songs." They also have two higher levels: "Invade a Neighbor" and "Lose."

Belgians, on the other hand, are all on holiday, as usual; the only threat they
are worried about is NATO pulling out of Brussels.

The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.

Australia, meanwhile, has raised its security level from "No worries" to
"She'll be alright, Mate." Two more escalation levels remain: "Crikey! I think we'll need to cancel the barbie this weekend!" and "The barbie is canceled." So far no situation has ever warranted use of the final escalation level.

-- John Cleese - British writer, actor and tall person.

CleeseJohn2

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 Trader2017-11-08 01:07:052017-11-08 01:07:05European Style Homeland Security
Mad Hedge Fund Trader

Testimonial

Diary, Newsletter, Testimonials

Signing up for your service was the easiest decision that I have ever made knowing the value that I am getting in return. Thanks for making the world of capital markets profitable for non-Wall Street guys that are busy working in other professions.

Until now, I have been forced to deal with money managers or "Company Men" that only push the products their higher ups want to sell. Finally, I have an alternative route to go.

Thanks a "Million."

Jim
Northbrook, IL

john-with-graffitti-in-the-background

https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/John-Thomas.jpg 399 332 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2017-11-08 01:06:272017-11-08 01:06:27Testimonial
Arthur Henry

November 7, 2017

Diary, Newsletter, Summary

Global Market Comments
November 7, 2017
Fiat Lux

Featured Trade:
(LAKE TAHOE CONFERENCE REVIEW),
(HOW TO MAKE MORE MONEY THAN I DO),
(ABX), (AAPL), (TSLA), (NVDA)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Arthur Henry https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Arthur Henry2017-11-07 01:08:032017-11-07 01:08:03November 7, 2017
Arthur Henry

Lake Tahoe Conference Review

Diary, Newsletter

It's tough to pick the highpoint of the Mad Hedge/Top Gun Masterminds Lake Tahoe Conference last weekend.

Maybe it was opening the second case of Caymus, the best cabernet produced in California.

Perhaps it was the herd of wild mustangs we drove past on the way from Reno/Tahoe airport.

Or possibly it was my third helping of filet mignon at the Friday night VIP dinner.

No, it was none of these.

Undoubtable, it was the guest who told me she parlayed $5,000 into $2 million over the past nine years, solely on the back of my Trade Alerts.

Among her big wins were buying Apple (AAPL) stock at $20, Tesla (TSLA) at $17, and an NVIDIA (NVDA) one year options leap that delivered a staggering 800% return.

To top it all, she picked up semiconductor equipment maker Lam Research (LRCX) right before its recent 50% move.

What's she eyeing now?

A new position in Intel (INTC).

Maybe I should turn over all my money for her to manage?

Of course, all you had to do to justify the trip was to walk outside and take a look at the scenery.

The High Sierras were topped with last night's snow fall down to 7,000 feet.

A stiff wind roiled and churned the sapphire blue lake.

Flocks of Canadian geese flew back and forth in front of the dramatic backdrop.

In case I bored the guests with my pontifications, they simply had to fixate on the wetsuit protected windsurfer racing across the wave tops right behind me.

Brad Barnes from Entruity Wealth Management informed the room with a presentation on "Fact Based Investing".

Top Gun's Matthew Buckly riveted the viewers with recollections of flying an F-18 Hornet for the Navy, and how to apply military disciplines and strategies to successful trading.

I did my best to hold the audience with two presentations on "The Field Guide to Market Tops" and "The Financial System in 2030."

If I suspected someone was nodding off from the Caymus, I simply opened the door a notch to allow a blast of cold air to issue a wakeup call.

The event was more than just an educational exercise on the short and long term future of the markets.

Guests also exchanged notes on how to best take advantage of my Trade Alerts.

It's clear than many are making a multiple of my reported performance.

Some of the ideas I head were utterly amazing. To learn more, please read "How to Make More Money Than I Do" below.

The forum was also a celebration of a decade of successful trading with the Diary of a Mad Hedge Fund Trader.

I heard tales of home mortgages and student loans paid off, the acquisition of new toys galore, chemotherapy treatments financed for uncovered family members, and financial security for life.

One even told me he loved Lake Tahoe so much that he was planning to move here from the East Coast, and had even applied for a position as a ski instructor at a local resort!

Needless to say, we'll be hosting another Lake Tahoe Conference in a year that will be bigger and better. Almost everyone who came this year plans to return.

I'll see you then.

John Thomas
CEO and Publisher
The Diary of a Mad Hedge Fund Trader

https://www.madhedgefundtrader.com/wp-content/uploads/2017/11/john-thomas-lake-tahoe-e1509920439322.jpg 379 284 Arthur Henry https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Arthur Henry2017-11-07 01:07:362017-11-07 01:07:36Lake Tahoe Conference Review
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