Asset allocation is the one question that I get every day, which I absolutely cannot answer. The reason is simple: no two investors are alike. The answer varies whether you are young or old, have $1,000 in the bank or $1 billion, are a sophisticated investor or an average Joe, in the top or the bottom tax bracket, and so on. This is something you should ask your financial advisor, if you haven?t fired him already, which you probably should.

Having said all that, there is one old hard and fast rule, which you should probably dump. It used to be prudent to own your age in bonds. So if you were 70, you should have had 70% of your assets in fixed income instruments and 30% in equities.

Given the extreme over valuation of all bonds today, and that we are probably on the eave of a 30 year bear market, I would completely ignore this rule and own no bonds. Instead you should substitute high dividend paying stocks for bonds. You can get 4% a year or more in yields these days, and get a great inflation hedge, to boot. You will also own what everyone else in the world is trying to buy right now, high yield US stocks.

Allocation: Are You Him?

Or Him?

The stunning and unprecedented move by the Bank of Japan last week boosted the Trade Alert Service of the Mad Hedge Fund Trader to a new all time high.

It was an incredible week, with me punching out 14 Trade Alerts to readers, burning up the fiber optic cable of the global broadband network. And I did all of this, sitting in front of the fire at my Lake Tahoe beachfront estate, drinking coffee nonstop. Some retirement!

I bet that the new governor of Japan?s central bank, my friend, Haruhiko Kuroda, would engineer a monetary easing that was so aggressive that it would collapse the country?s beleaguered currency. All those nights playing Scrabble with him have finally paid off. As a result, the 2013 profit for the Trade Alert Service soared to an incredible 35%.

The 28-month total return has punched through to a breathtaking 90%, compared to a modest 18.5% return for the Dow average during the same period. That raises the average annualized return for the Trade Alert Service to 38.6%, elevating it to the pinnacle of the hedge fund ranks.

My careful calculation that the stock markets would continue to grind up to new all time highs in the face of complete disbelief and multiple international shocks paid off big time, as I continued to run long positions in the S&P during January to March.

My substantial short volatility positions are contributing to profits daily, with the closely watched (VIX) Index plummeting at one point to a new five year low at 11%. I booked nice profits from holdings in American International Group (AIG) and copper producer, Freeport McMoRan (FCX), and the Russell 2000 (IWM).

Sensing that the stock market was getting overbought for the short term, I switched from a long only to a balanced long/short trading book at the beginning of April. That really allowed me to coin in on short positions in the S&P 500 (SPY), Bank of America (BAC), and United Continental Group (UAL).

It hasn?t entirely been a rose garden. The rapid market swoon cost me some money on my (UAL) and (BAC) call options. Apple (AAPL) has taken another bite out of me, although I will only lose money on the position if it trades and stays below $420 over the next 9 trading days. But as they taught me at my karate dojo in Tokyo during the early 1970?s, you can?t win a tournament without taking a few hits.

Trade Alerts that I wrote up, but never sent, worked too. That?s because I have been 100% invested for the entire year in long stock/short yen positions. However, followers of my biweekly strategy webinars caught my drift and benefited from the thinking, and many did these trades on their own. These included shorts in the Treasury bond market, (TLT), the Euro (FXE), (EUO), and the British pound (FXB).

Sometimes the best trades are the ones you don?t do. I have been able to dodge the bullets that have been killing off other hedge funds, including those in gold (GLD), silver, (SLV), oil (USO), and commodities (CORN), (DBA), (CU). Oh, and I didn?t have a single penny in a Cyprus bank.

All told, the last 27 out of the last 28 closing recommendations of the Trade Alert Service have been profitable, and I have another six moneymakers still on the books.

Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011 and 14.87% in 2012. The service includes my Trade Alert Service, daily newsletter, real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.

How Low Can She Go?

A Triple Top or a Breakout Launch?

Life is Good

Expect to hear a lot about ignition in the next year. No, I don?t mean the rebuilt ignition for the beat up ?68 Cadillac El Dorado up on blocks in your front yard. I?m referring to the inauguration of the National Ignition Facility next door to me at Lawrence Livermore National Labs in Livermore, California.

Mention California to most people, and images of love beads, tie died T-shirts, and Birkenstocks come to mind. But it is also the home of the hydrogen bomb, which was originally designed amid the vineyards and cow pastures of this bucolic suburb. The thinking at the time was that if someone accidently flipped the wrong switch, it wouldn?t blow up San Francisco, or more importantly, Berkeley.

The $5 billion project aims 192 lasers at a BB sized piece of frozen hydrogen, using fusion to convert it to helium and unlimited amounts of clean energy. The heat released by this process reaches 100 million degrees, hotter than the core of the sun, and will be used to fuel conventional steam electric power plants. There is no need for a four foot thick reinforced concrete containment structure that accounts for half the construction cost of conventional nuclear plants. The entire facility is housed in a large warehouse.

The raw material is seawater, and a byproduct is liquid hydrogen, which can be used to fuel cars, trucks, and aircraft. If this all sounds like it is out of Star Trek, you?d be right. I worked with these guys in the early seventies, back when math was used to make things, and before it was used to game financial markets, and I can tell you, there is not a smarter and more dedicated bunch of people on the planet.

If it works, we will get unlimited amounts of clean energy for low cost in about 20 years. Oil will only be used to make plastics and fertilizer, taking the price down to $10 for domestic production only. The crude left in the Middle East will become worthless. Lumps of coal will only be found in museums, or in jewelry, its original use. If it doesn?t work, it will melt the adjacent Mt. Diablo and take me with it. If you don?t get your newsletter tomorrow, you?ll know what happened. Now what is this switch for?