Featured Trade: (LAS VEGAS WEDNESDAY, MAY 14 GLOBAL STRAGEGY LUNCHEON), (THE MYSTERY OF THE MISSING $100 BILLION), (TLT), (AN EVENING WITH CONGRESS BARNEY FRANK)
Featured Trade: (FRIDAY APRIL 25 SAN FRANCISCO STRATEGY LUNCHEON (ITS TIME FOR A STRATEGY CHANGE), (SPY), (DAL), (GE), (GS), (BAC), (TLT), ($DAX), (HOW TO TRADE CALL SPREADS IN AUSTRALIA), (MY FAVORITE SECRET ECONOMIC INDICATOR)
SPDR S&P 500 (SPY)
Delta Air Lines Inc. (DAL)
General Electric Company (GE)
The Goldman Sachs Group, Inc. (GS)
Bank of America Corporation (BAC)
iShares 20+ Year Treasury Bond (TLT)
German DAX Composite (EOD) Deut ($DAX)
There is absolutely no doubt that both risk and volatility are rising in the financial markets. The higher the indexes rise, the sharper the intraday breaks. That is never a healthy sign for a bull market that has thrived for more than two years without a 10% correction.
The Crimean referendum should have been a yawn, not worthy of the 400 point swan dive that the Dow Average delivered last week. When the markets over react to the downside, and then rally back only on small volume, that is another excuse to pare back risk.
Some 45 years in the markets have taught me that whenever I have a great run, they will then suddenly reverse and bite me back. And let?s face it, the last two years have been spectacular, the Trade Alert Service nearly doubling the assets of loyal followers. It?s time to learn some humility, before the markets impose it upon you.
All of the recent US economic data has been good. But this isn?t about the data. It is all about market sentiment. And the current rumblings in Crimea are definitely not market friendly, pro global growth, pro risk ones.
If serious economic sanctions are imposed on Russia by Europe and the US, the impact on global growth will be negative, even if it is small. Traders are all about the next incremental change, not necessarily the magnitude.
So I am inclined to take small profits when they arise. No more hanging on for the last dollar. That was a 2013 play. Look for a market that grinds for days, and then concentrates all of the volatility for the week in a single day, like today.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Strategy-Change.jpg324413Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-18 01:05:072014-03-18 01:05:07It?s Time for a Strategy Change
For the many Australians who recently subscribed to Mad Hedge Fund Trader PRO, a temporary regulatory obstacle has emerged.
There are two types of trading accounts permitted by Australian financial regulators:
Cash Accounts ? opened by individuals Regulation ?T? accounts -? opened by corporations and trusts
Reg ?T? accounts have no problems executing any of my Trade Alerts, including those for stocks, bonds, exchange trade funds, options, call spreads, and put spreads. However, regulators have recently barred Cash Accounts from trading in call spreads and put spreads.
Their logic is that individuals lack the financial sophistication to engage in these types of trades. The reality is the opposite, that they are limiting individuals to engaging in higher risk positions while banning them from the lower risk ones. Welcome to the world of financial regulation!
The easy way around this is for individuals to set up a paper corporation for the purpose of handling their trading activities. This is far easier than it first appears. My friends at Halifax Investment Services will do this for you for as little at AUS$575. One swipe of your credit card and you are in business.
The benefits of doing this are huge. You can then execute every type of trade under the sun, including all of the Mad Hedge Fund Trader?s Trade Alerts. You can also reduce your tax rate from as high as 47% that hits profits in Cash Accounts to only a mere 30%. I don?t know how people in the Land Down Under view taxation, but here in the US it is absolutely despised.
Every professional trader in Australia operates through a corporate entity, and you would be mad not to do so. If the past is any guide, long-term followers of my service all have one problem in common: they make too much money, creating unforeseen tax headaches.
There is one other way to deal with the Australian regulator?s discrimination against individual investors: wait a couple months. They have been sued by a number of individuals and organizations seeking to block this double standard. My in country tax attorneys tell me that a resolution is expected soon. Once the issue is settled, the only difference between Reg T and Cash Accounts will be the tax rate.
To avail yourselves of these services, please open an account with Halifax Investment Services Ltd. by clicking here at??http://madhedgefundradio.com/hisl-australia/ . There, you will be asked to complete a form with your basic information. Within a few days, you should receive a phone call from a Halifax financial advisor who has been assigned to provide you assistance.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Kangaroo.jpg263397Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-18 01:04:172014-03-18 01:04:17How to Trade Call Spreads in Australia
Featured Trade: (FRIDAY APRIL 4 INCLINE VILLAGE, NEVADA STRATEGY LUNCHEON), (CHARTS TO WATCH FOR AN END TO THE CRISIS), (SPY), (TLT),(FXY), (RSX), (GLD), (CU), (CYB), (VIX), (VXX), (RUNNING THE SAN FRANCISCO BAY TO BREAKERS)
SPDR S&P 500 (SPY)
iShares 20+ Year Treasury Bond (TLT)
CurrencyShares Japanese Yen Trust (FXY)
Market Vectors Russia ETF (RSX)
SPDR Gold Shares (GLD)
First Trust ISE Global Copper Index (CU)
WisdomTree Chinese Yuan Strategy (CYB)
VOLATILITY S&P 500 (^VIX)
iPath S&P 500 VIX ST Futures ETN (VXX)
Bad China data?.Russia threatens the Ukraine?.more bad China data?.maneuvers at the Russia-Crimea border. The bull has been punched out with a market that was down every day last week, China and Russia both taking turns thrashing investors, like tag team wrestlers. When will it end?
The canaries in the coal mine will be found in the charts below. This is where you will first hear the all-clear signal, when it is safe to return with an aggressive ?RISK ON? posture.
As always, watch the bond market. If the current rally in the (TLT) fails anywhere short of $110, it?s a sign that traders are fleeing the safety of the Treasury bond market and are happy to return to riskier assets, like equities. That equates to a ten year Treasury bond yield of just over 2.50%. A breakout of prices above this, and yields below suggest that more trouble is coming.
Keep close tabs on the Chinese Yuan (CYB). After an unrelenting five-year appreciation, it started a swan dive two weeks ago. That is when a banking crises in the Middle Kingdom started picking up steam. This prompted currency traders to unload Chinese renminbi for more stable dollars. The collapse of copper mirrors this. New signs of life in the Yuan and copper will hint that trouble there is over for now.
The Japanese yen is another big one to monitor. Most hedge funds borrow yen and sell them to finance long positions around the world. This is why the yen has been perennially week for the past two years. But when they dump these positions and hide under their beds, the reverse happens.
They buy back their yen shorts, pushing it up. That?s why the latest round of jitters has the Japanese currency probing four-month highs. If the yen fails here, it?s because investors are going back into the market for other assets.
Of course, the Russian stock market (RSX) is a no brainer to watch. Thanks to the antics of Vladimir Putin, it is down 28% so far in 2014, making it the world?s worst performing market this year. Invading your neighbors and threatening to incite WWIII is not good for your equities. I doubt he cares, but emerging market investors do.
Gold (GLD) is certainly earning its pay as a flight to safety instrument. It has been flying like a bat out of hell all year and is now testing major resistance. If the barbarous relic suddenly loses its luster, the memo will go out to buy paper assets once more.
Finally, keep the chart for the Volatility Index (VIX) planted on the top of your screen. Recent tops have been around the $21 level, only $3 higher than the current level. When cooler heads prevail, the (VIX) will collapse once again. Puts on the (VXX) are the way to play this move.
The interesting thing about these charts is that they are all moving to the extreme edges of multi month ranges. So we could be one more flush away from the end of this move.
That?s unless Russia really does invade Crimea in force. Then all bets are off.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Atomic-Bomb.jpg334447Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-17 01:04:512014-03-17 01:04:51Charts to Watch For an End to the Crisis
Featured Trade: (ORLANDO FLORIDA SATURDAY, MAY 17 GLOBAL STRAGEGY LUNCHEON), (CASHING IN ON THE SAUDI ARABIA OF MILK), (ENZL), (TAKE A RIDE IN THE NEW SHORT JUNK ETF), (SJB), (JNK), (CORN)
iShares MSCI New Zealand Capped (ENZL)
ProShares Short High Yield (SJB)
SPDR Barclays High Yield Bond (JNK)
Teucrium Corn (CORN)
On of the scariest parts of driving around New Zealand a few weeks ago were these huge trucks and trailers that came barreling at you on tiny narrow roads. There couldn?t have been more than a few inches of clearance between us.
This, I had to deal with while driving a rental stick shift on the left side of the road in a pouring rain storm. Yes, they still make sticks in some parts of the world.
Then I noticed that all of the farmers were driving brand new luxury SUV?s, even after paying import prices for the vehicles that were 50% higher than at home. My radar kicked on; there?s got to be a trade here.
My suspicions were confirmed when I stopped at a remote farm to buy a kilo of blueberries and chatted up the owner. The beefy, deeply tanned gentleman with the broad brimmed leather hat and baggy shorts told me that business was booming.
Milk exports to China were exploding, land prices were soaring, and everything was good. The only problem was that the economy was growing faster than the ability of the road network to keep up, hence my problem with the lorries.
HSBC expects that New Zealand?s GDP will leap from 2.8% last year to 3.4% or higher in 2014. Exports to China, far and away the country?s largest trading partner, rocketed by 45% in 2013. Chinese capital is pouring into the Land of the Kiwis at an unprecedented rate, soaking up all the real estate they can get their hands on.
The financial markets have noticed. The iShares MSCI New Zealand Investable Market Index Fund ETF (ENZL) has been one of the world?s best performing stock markets this year, and more gains are expected. The New Zealand dollar has also been strong, and is set to reach parity with the Australian dollar for the first time in 40 years.
Ironically, poor Chinese regulation has been at the root of the economic boom. Any Chinese mother who can afford it only buys foreign infant formula. Domestic supplies are frequently found to be tainted with toxic chemicals or heavy metals. This puts New Zealand right in the sweet spot to benefit from a rising middle class in the Middle Kingdom.
You would think that Fonterra, which accounts for 90% of the country?s milk products exports, would be going through the roof now (click the following ?for their site: ?https://www.fonterra.com/global/en). It isn?t.
It had a scare last summer over bacterial contamination which has been pounding the stock ever since. That?s why New Zealand is a better index than single name play best captured through the ETF (ENZL). Fonterra shares do not trade directly on the New Zealand stock exchange, only in unit trust form.
That hasn?t prevented the industry from growing at a breakneck speed. The dairy heard has doubled to 6.5 million cows since 1980, and now outnumber people in the country by 2 million. Some 741,000 acres have been converted from other agriculture to dairy during this time, creating environmental problems. This has prompted some wags to dub New Zealand the ?Saudi Arabia of Milk.?
The boom in milk products isn?t unique to the Southern hemisphere. Chinese demand has also boosted dairy prices in the US and Europe, especially in heavily subsidized France.
All this means that the (ENZL) could have much more to run. Rising trade and current account surpluses are almost always a good formula for stock market riches. And if you get a chance to visit your investment, take it. The women down there are gorgeous.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/New-Zealand-Flag.jpg232458Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-14 01:04:582014-03-14 01:04:58Cashing in on the ?Saudi Arabia of Milk?
Much has been made of the rising level of margin debt held by individuals. Cumulative NYSE margin debt, or the amount of money lent to buy stocks on credit, is rapidly approaching $2.3 trillion, an all time high.
Historically, when this figure peaked, and no more money was available for mom and pop to buy shares with broker loans, markets fell.
This has been put forward by talking heads, pretenders, and wanabees as a major reason why the stock market is imminently going to crash. But if you followed their advice until now you would have sat out one of the most impressive bull markets in history, or gone broke shorting against it. Follow their advice, and would have cheated yourself out of a fortune.
For a start, please note that this is a 20-year chart. The numbers have been high and rising for 18 months, and that is a very long term to be wrong about the stock market. Only TV personalities can be wrong this long, and still keep their jobs. Everyone else would have landed in the jobs section on Craig?s List a long time ago.
The harsh reality is that individuals account for such an infinitesimally small share of the market that their margin debt has become an irrelevance. Hedge funds alone account for 60% of the daily trading activity, with high frequency traders taking up a large share of this. Institutional activity, such as the large pension funds, mutual funds, and ETF?s account for most of the rest.
True individuals are somewhere in the single digits in terms of daily trading activity. Focus on their activities alone, and you are characterizing the majority with the input from a tiny minority. You see this in politics all day long. Try it with your investments, and you will lose all your money.
While there is no doubt that leverage in the markets is expanding as they rise, it is found in different areas. Modern leverage is to be found in the derivatives markets, such as in options and futures, credit derivatives, 3X ETF?s, and other esoterica. You also see it in the private deals that hedge fund custodians cut with their largest clients.
Looking at this measure, margin is at a fraction of the 2007 peak. In fact, thanks to the new regulations imposed by Dodd-Frank, many forms of securities credit are now illegal. Bank capital requirements and the prohibition of house trading assured by the Volker Rule come to mind.
Greater risk control adopted by both borrowers and lenders guarantee that far fewer are betting the ranch. Systemic risks are now virtually nil. As you may recall, excessive leverage almost brought the world to an end in 2008.
In fact hedge funds and institutions have far more credit available to them than they are using. If they really wanted to put they pedal to the metal, markets could easily soar by 50%-100% from here before they run out of dough. I think that will eventually happen before the music stops playing. But that could be years off.
If you feel like you have been lead astray by the exaggerated importance of margin debt, don?t worry, you are not alone. One of the many reasons that the Federal Reserve missed the severity of the Great Recession early on was that they thought that margin debt was reasonable, given the larger market capitalization of the financial system.
They were completely unaware that new, highly toxic forms of leverage had been invented since the last bear market and recession that could wipe out every financial institution on the planet. They found out the truth the hard way.
Make sure you don?t. Reliance on antiquated data sets can be hazardous to your wealth. Don?t fall into this backward looking trap.
https://www.madhedgefundtrader.com/wp-content/uploads/2014/03/Child-with-Binoculars.jpg317440Mad Hedge Fund Traderhttps://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.pngMad Hedge Fund Trader2014-03-13 09:02:062014-03-13 09:02:06Why This Chart is Utterly Meaningless
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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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