(IWM) Archives

April 17 Biweekly Strategy Webinar Q&A

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader April 17 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: What will the market do after the Muller report is out?

A: Absolutely nothing—this has been a total nonmarket event from the very beginning. Even if Trump gets impeached, Pence will continue with the same kinds of policies.

Q: If we are so close to the peak, when do we go short?

A: It’s simple: markets can remain irrational longer than you can remain liquid. Those shorts are expensive. As long as global excess liquidity continues pouring into the U.S., you’ll not want to short anything. I think what we’ll see is a market that slowly grinds upward until it’s extremely overbought.

Q: China (FXI) is showing some economic strength. Will this last?

A: Probably, yes. China was first to stimulate their economy and to stimulate it the most. The delayed effect is kicking in now. If we do get a resolution of the trade war, you want to buy China, not the U.S.

Q: Are commodities expected to be strong?

A: Yes, China stimulating their economy and they are the world’s largest consumer commodities.

Q: When is the ProShares Short Russell 2000 ETF (RWM) actionable?

A: Probably very soon. You really do see the double top forming in the Russell 2000 (IWM), and if we don’t get any movement in the next day or two, it will also start to roll over. The Russell 2000 is the canary in the coal mine for the main market. Even if the main market continues to grind up on small volume the (IWM) will go nowhere.

Q: Why do you recommend buying the iPath Series B S&P 500 VIX Short Term Futures ETN (VXXB) instead of the Volatility Index (VIX)?

A: The VIX doesn’t have an actual ETF behind it, so you have to buy either options on the futures or a derivative ETF. The (VXXB), which has recently been renamed, is an actual ETF which does have a huge amount of time decay built into it, so it’s easier for people to trade. You don’t need an option for futures qualification on your brokerage account to buy the (VXXB) which most people don’t have—it’s just a straight ETF.

Q: So much of the market cap is based on revenues outside the U.S., or GDP making things look more expensive than they actually are. What are your thoughts on this?

A: That is true; the U.S. GDP is somewhat out of date and we as stock traders don’t buy the GDP, we buy individual stocks. Mad Hedge Fund Trader in particular only focuses on the 5% or so—stocks that are absolutely leading the market—and the rest of the 95% is absolutely irrelevant. That 95% is what makes up most of the GDP. A lot of people have actually been caught in the GDP trap this year, expecting a terrible GDP number in Q1 and staying out of the market because of that when, in fact, their individual stocks have been going up 50%. So, that’s something to be careful of.

Q: Is it time to jump into Qualcomm (QCOM)?

A: Probably, yes, on the dip. It’s already had a nice 46% pop so it’s a little late now. The battle with Apple (AAPL) was overhanging that stock for years.

Q: Will Trump next slap tariffs on German autos and what will that do to American shares? Should I buy General Motors (GM)?

A: Absolutely not; if we do slap tariffs on German autos, Europe will retaliate against every U.S. carmaker and that would be disastrous for us. We already know that trade wars are bad news for stocks. Industry-specific trade wars are pure poison. So, you don't want to buy the U.S. car industry on a European trade war. In fact, you don’t want to buy anything. The European trade war might be the cause of the summer correction. Destroying the economies of your largest customers is always bad for business.

Q: How much debt can the global economy keep taking on before a crash?

A: Apparently, it’s a lot more with interest rates at these ridiculously low levels. We’re in uncharted territory now. We really don't know how much more it can take, but we know it’s more because interest rates are so low. With every new borrowing, the global economy is making itself increasingly sensitive to any interest rate increases. This is a policy you should enact only at bear market bottoms, not bull market tops. It is borrowing economic growth from futures year which we may not have.

Q: Is the worst over for Tesla (TSLA) or do you think car sales will get worse?

A: I think car sales will get better, but it may take several months to see the actual production numbers. In the meantime, the burden of proof is on Tesla. Any other surprises on that stock could see us break to a new 2 year low—that's why I don’t want to touch it. They’ve lately been adopting policies that one normally associates with imminent recessions, like closing most of their store and getting rid of customer support staff.

Q: Is 2019 a “sell in May and go away” type year?

A: It’s really looking like a great “Sell in May” is setting up. What’s helping is that we’ve gone up in a straight line practically every day this year. Also, in the first 4 months of the year, your allocations for equities are done. We have about 6 months of dead territory to cover from May onward— narrow trading ranges or severe drops. That, by the way, is also the perfect environment for deep-in-the-money put spreads, which we plan to be setting up soon.

Q: Is it time to buy Freeport McMoRan (FCX) in to play both oil and copper?

A: Yes. They’re both being driven by the same thing: China demand. China is the world’s largest new buyer of both of these resources. But you’re late in the cycle, so use dips and choose your entry points cautiously. (FCX) is not an oil play. It is only a copper (COPX) and gold (GLD) play.

Q: Are you still against Bitcoin?

A: There are simply too many better trading and investment options to focus on than Bitcoin. Bitcoin is like buying a lottery ticket—you’re 10 times more likely to get struck by lightning than you are to win.

Q: Are there any LEAPS put to buy right now?

A: You never buy a Long-Term Equity Appreciation Securities (LEAPS) at market tops. You only buy these long-term bull option plays at really severe market selloffs like we had in November/December. Otherwise, you’ll get your head handed to you.

Q: What is your outlook on U.S. dollar and gold?

A: U.S. dollar should be decreasing on its lower interest rates but everyone else is lowering their rates faster than us, so that's why it’s staying high. Eventually, I expect it to go down but not yet. Gold will be weak as long as we’re on a global “RISK ON” environment, which could last another month.

Q: Is Netflix (NFLX) a buy here, after the earnings report?

A: Yes, but don't buy on the pop, buy on the dip. They have a huge head start over rivals Amazon (AMZN) and Walt Disney (DIS) and the overall market is growing fast enough to accommodate everyone.

Q: Will wages keep going up in 2019?

A: Yes, but technology is destroying jobs faster than inflation can raise wages so they won’t increase much—pennies rather than dollars.

Q: How about buying a big pullback?

A: If we get one, it would be in the spring or summer. I would buy a big pullback as long as the U.S. is hyper-stimulating its economy and flooding the world with excess liquidity. You wouldn't want to bet against that. We may not see the beginning of the true bear market for another year. Any pullbacks before that will just be corrections in a broader bull market.

Good Luck and Good Trading
John Thomas
CEO & Publisher
Diary of a Mad Hedge Fund Trader

April 5, 2019

Diary, Newsletter, Summary

Global Market Comments
April 5, 2019
Fiat Lux

Featured Trade:
(APRIL 3 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (VIX), (TSLA), (BA), (FXB), (AMZN), (IWM), (EWU)

April 3 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader April 3 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: I’ve gotten a lot of newsletters but not many trades. Why is that?

A: Perfect trades do not happen every day of the year. They happen a few times a year and they tend to bunch up. Most time in the market is spent waiting for an entry point and then piling on 5 or 10 trades rapidly. We’re letting our profits run and waiting for new trades to open up, so just be patient and we’ll get you more trades than you can chew on.

If you have to ask this question, you are probably overtrading. The goal is to make yourself rich, not your broker. The other newsletters that offer a trade alert every day don’t publish their performance as I do and lose money for their followers hand over fist.

Q: Are we on track for a market peak in May?

A: Yes; if we keep climbing up, eventually hitting new highs this month, then we are setting up perfectly for a pretty sharp pullback around May 10th. That would be a good time to get rid of all your longs and put on some short positions, certainly deep in the money put spreads—we’ll be knocking quite a few of those out in the end of April/beginning of May.

Q: Are you worried about the Russell 2000 (IWM) climb?

A: I’m not. If you look at the chart, every up move has been weak, and every down move has been strong. Looking at the chart, it’s still in a clear downtrend dragging all the other markets, and this is because small-cap stocks do poorly in recessions or market pullbacks.

Q: How severe and how long do you see the coming bear market being?

A: If history repeats itself, then it’s going to be rather shallow. The last move down was only three months long and that stunned a lot of people who were expecting a more extreme pullback. I don’t see conditions in place that indicate a radically deep pullback—25% at most and 6-12 months in duration, which won’t be enough to liquidate your portfolio and justify the costs of getting out now and trying to get back in later. They key thing is that there are no systemic threats to the market other than the exploding levels of government borrowing.

Q: If you had the Tesla (TSLA) April $310-$330 vertical bear put spread, would you keep it?

A: Probably, yes, because you have a $15 cushion against a good news surprise and a lot less at risk. I got out of my Tesla (TSLA) April $300-$320 vertical bear put spread because my safety cushion shrank to only $5 and the risk/reward turned sharply against me.

Q: Should we be buying the Volatility Index (VIX) here for protection?

A: Not yet; we still have enough momentum in the stock market to hit all-time highs. After that, you really want to start looking at the VIX hard, especially if we get down to the $12 level. So good thinking, just not quite yet—as we know in the market, timing is everything.

Q: Are you getting nervous about the short Disney (DIS) calls?

A: I’m always nervous, every day of the year about every position, and yes, I’m watching them. You are paying me to be nervous so you can go play golf. We may take a small hit on the calls if the stock keeps rising, but that will be offset by a bigger gain on the call spread we’re long against.

Q: When is the quarterly option expiration?

A: It was on March 15 and the next one is June 21. This is an off-month expiration coming up on April 18th, and that’s only 12 trading days away.

Q: If you get a hard Brexit (FXB) in the next few weeks, what will happen to the pound?

A: It’s risen about 10% in the last few weeks on hopes of a Brexit outright failure. If that doesn't happen, the pound will get absolutely slaughtered.

Q: If China (FXI) is stimulating their economy, will that eventually help the U.S.?

A: Stimulus anywhere in the world always gets back to the U.S. because we’re the world’s largest market. So, yes, it will be positive.

Q: Would you consider trading UK stocks under Brexit fail?

A: Yes, and there is a UK stock ETF, the iShares MSCI United Kingdom ETF(EWU) and you’re looking at a 20%-25% rise in the British stock market if they completely give up on Brexit or just have another election.

Q: What are your thoughts on the China trade war?

A: The Chinese are in no rush to settle; that’s why we keep missing deadline after deadline and all the positive rumors are coming from the U.S. side. It’s looking more like a photo op trade deal than an actual one.

Q: If we get a top in stocks in May, how far do you expect (SPY) to go?

A: Not far; maybe 5% or 10%, you just have to allow all the recent players who got in to get out again, and if the economy slows to, say, a 1% rate in Q1, that’s not a panicky type market. That’s a 10% correction market and what we’ll probably get. If the economy then improves in Q2 and Q3, then we may go back up again to new highs. We seem to have a three quarter a year stock market and therefore, a three quarter a year stock market. Q1 is always a write off for the economy.

Q: Do you still like Amazon (AMZN)?

A: Absolutely, yes—it’s going to new highs. And it’s also starting to make a move on the food market, cutting prices at Whole Foods, which it owns, for the 3rd time this year. So, it’s moving on several fronts now, including healthcare. There’s at least a double in the company long term from these levels, and a triple if they break the company up.

Q: If you bought the stock in Boeing (BA) instead of the option spread, would you stay long?

A: I would, yes. It’s a great company and there's an easy 10% move in that stock once they get the 737 MAX back off the ground again which they should do within the month.

Q: What do you think about food stocks with big name brands like Hershey (HSY)?

A: I’ve never really liked the food industry. It’s really a low margin industry. You’re looking at 2% a year earnings growth against the big food companies vs 20% a year growth in tech which is why I stick with tech. My advice is always to focus on the few sectors that are the best 5% of the market and leave the dross for the index funds.

Q: With the current bullish wave in the market (SPY), what sector/stocks do you think have the most momentum to break out another 10% to 15% gain in the next one to three months?

A: The next 10% to 15% in the market will only happen after we drop 5-10% first. I believe this is the last 5% move of the China trade deal rally and after that, markets will fall or go to sleep for six months.

Q: Do you expect 2019 to be more like 2018 or 2017? We know you are predicting the (SPX) will hit an all-time high of 3000 in 2019. Do you think it zooms up to a blow-off top in Q2/Q3 and then pulls back in Q4, like 2018? Or, do you expect a steadier ascent with minor pullbacks along the way (like 2017), closing at or near the year's highs on Dec 31? This guidance will really help.

A: I think we have made most of the gains for 2019. Only the tag ends are lifted. We have already hit the upside targets for most strategists, and mine is only 7% higher. After that, there is a whole lot of boring ahead of us for 2019 and the (VIX) should drop to $9. After complaining about horrendous market volatility in December, traders will beg for volatility.

Good Luck and Good Trading
John Thomas
CEO & Publisher
Diary of a Mad Hedge Fund Trader

March 22, 2019

Diary, Newsletter, Summary

Global Market Comments
March 22, 2019
Fiat Lux

Featured Trade:

(I HAVE AN OPENING FOR THE MAD HEDGE FUND TRADER CONCIERGE SERVICE),
(MARCH 20 BIWEEKLY STRATEGY WEBINAR Q&A),
(BA), (FCX), (IWM), (JNJ), (FXB), (VIX), (JPM)

March 20 Biweekly Strategy Webinar Q&A

Diary, Newsletter

Below please find subscribers’ Q&A for the Mad Hedge Fund Trader March 20 Global Strategy Webinar with my guest and co-host Bill Davis of the Mad Day Trader. Keep those questions coming!

Q: What do you make of the Fed’s move today in interest rates?

A: By cutting short their balance sheet unwind early and ending quantitative tightening (QT) early, it amounts to two surprise interest rate cuts and is hugely “RISK ON”. In effect, they are injecting $2.7 trillion in new cash into the financial system. New highs in stocks beckon, and technology stocks will lead. This is a game changer. In a heartbeat, the world has moved from QT to QE, and we already know what that means for socks. They go up.

Q: Why buy Boeing shares (BA) ahead of a global recession?

A: It’s an 18-day bet that I’ve made in the options market. The US economic data is already indicating recession. The data will continue to worsen and that will continue until we go into a recession. But that’s not happening in 18 trading days. Also, we’re getting into Boeing down 20% from the top so our risk is minimal.

Q: Why are we in an open Russell 2000 (IWM) short position?

A: We now have three long positions— 40% on the long side with the Freeport McMoRan (FCX) double position. It’s always nice to have something on the other side to hedge sudden 145-point declines like we have today. Ideally, you want to be hedged at all times. But it’s hard to fund good companies to sell short in a bull market.

Q: Do you need some euphoria to get the Volatility Index (VIX) to the $30-$60 level?

A: No, you don’t need euphoria. You need fear and panic. The (VIX) is a good “fear index” in that it rises when markets are crashing and falling when markets are slowly rising. And for that reason, I’m not buying (VIX) right now. With a sideways to slowly rising market, we could see the $9 handle again before this move is over.

Q: What should be the exit on the Russell 2000 (IWM)?

A: One choice is taking 80% of the maximum profit when you hit it—that’s where the risk-reward tips against you if you keep the position. The other option is to be greedy and run it all the way into expiration, taking the full profit. It depends on your risk tolerance. Remember, we hit the 80% profit three times in March only to stop out of positions for a loss. The market just doesn’t seem to want to let you take the whole 100%.

Q: Why are all your expirations on April 18?

A: That’s when the monthly options expire; therefore, they have the most liquidity of any other option expiration. If you go with the weeklies before or after the monthlies, the liquidity declines dramatically, which can be very frustrating. Since I used to cover only the largest clients, we could only trade in monthlies because we needed the size.

Q: Will Johnson and Johnson (JNJ) survive all those talcum powder lawsuits?

A: They’ve been going on for 10 years—you’d think they’d know by now if they have asbestos in their talcum powder or not. I highly doubt this will get anywhere; they’ll probably win everything on appeal.

Q: What do you anticipate on Brexit?

A: I think eventually Brexit will fail; we’ll have a referendum which will get voted down, Britain will rejoin Europe, and the British pound (FXB) will go to $1.65 to the dollar where it was when Brexit hit three years ago, up from $1.29 today. It would be economic suicide for Britain to leave Europe, as they would have to compete against Europe, the US, and China alone, and they are slowly figuring that out. Demographic change alone over three years would guarantee that another referendum fails.

Q: My partner owns JP Morgan (JPM). Do you still say banks are not a good place to be?

A: Yes. Fintech is eating their lunch. If they couldn't go up with interest rates moving up in the right direction, they certainly won’t be doing better now that interest rates are going down. Legacy banks are the new buggy whip industry.

Q: Why are commodities (FCX) increasing with a coming recession?

A: They are a hard asset and do better in inflation. Also, they’re stimulating their economy in China and we aren't—commodities do better in that situation as China is the world’s largest buyer of commodities, as do all Chinese investments.

Q: Would you buy Biogen (BIIB) on the dip? Its down 30% today.

A: Canceling their advanced phase three trials for the Alzheimer drug Aducanumab is the worst-case scenario for a biotech company. Some $12 billion in prospective income is down the toilet and many years of R&D costs are a complete write-off. Avoid (BIIB) until the dust settles.

March 18, 2019

Diary, Newsletter, Summary

Global Market Comments
March 18, 2019
Fiat Lux

Featured Trade:

(MARKET OUTLOOK FOR THE WEEK AHEAD, OR A STIFF DOSE OF HUMILITY),
(FCX), (AAPL), (IWM), (SPY), (BA), (FXI), (FXB)

The Market Outlook for the Week Ahead, or a Stiff Dose of Humility

Diary, Newsletter

Sometimes markets have to give you a solid dose of humility, blindside you with a sucker punch, and slap you across the face with a wet kipper. Last week was definitely one of those weeks for me.

It was only just a matter of time before this happened. We posted new record gains for the first ten weeks of 2019. It was just a matter of time before the reality check kicked in.

I believed that we have seen the sharpest rally in stocks since the 2009 bottom, we were overdue for a respite. That respite came and only lasted a week. It has been an especially frustrating week for those few of us who watch economic data because it has been unremittingly awful while stocks rose daily.

There were really no reasons for shares to rise that week. There were also no reasons to sell, other than a dozen or so complete disasters that are looming just over the horizon. Still, to quote an old friend of mine, “Markets can remain irrational longer than you can remain liquid.”

The bull market reached ten years old last week, and if you read this letter you caught every dollar of the move up since then, plus some. But how much longer will it last? The technicals say it’s already in its death throes.

China trade negotiations (FXI) endlessly continued as they have for a year, but now the Chinese have thrown up a roadblock. They want everything in writing. In the wake of the North Korean disaster, can you blame them? This will weigh heavily on stocks until it's done.

Another day, another Brexit vote failed again. The pound (FXB) is doing the Watusi. Avoid all UK plays until the issue is decided.

The share buyback blackout started on Friday for many companies which are not allowed to repurchase their own shares up to 30 days ahead of the Q1 earnings reports. If you take the largest buyers of shares out of the market, what is left? Look to play the short side for the market.

Boeing (BA) hit bottom as the US became the last country to ban the 737 Max 8. Imagine being 35,000 feet in the air and you find out your plane is grounded for safety reasons, as 6,000 people did last week. Buy more (BA) on the dip. The next move is from $360 to $450.

Weekly Jobless Claims jumped, by 6,000 to a seasonally adjusted 229,000. Notice claims aren’t falling anymore. Another sign the tax cut stimulus is shrinking? Or that there is no one left to hire with any skills whatsoever?

Tesla (TSLA) released its Model Y SUV, but the cheaper $39,000 version won’t be available until 2021 and the stock dove. We are approaching the make or break level for the stock, the bottom of a two-year range. Get ready to buy on the meltdown. This is a ten bagger in a decade. Buy (TSLA).

The Mad Hedge Fund Trader lost ground last week. The tenth rally in 11 weeks made my short positions lose money faster than my long positions could make it back.

The Mad Hedge Technology Letter was stopped pit of a short position in Apple (AAPL) for a small loss a heartbreaking three days before its options expiration.

February came in at a hot +4.16% for the Mad Hedge Fund Trader. March started negative, down -2.18%.

My 2019 year to date return retreated to +11.46%, a new all-time high and boosting my trailing one-year return back up to +23.72%.

My nine-year return pared back to +311.60%. The average annualized return appreciated to +33.69%.

I am now 60% in cash, 20% long Freeport McMoRan (GLD), 10% short the S&P 500, and 10% short the Russell 2000. My short bond position (TLT) expired at its maximum profit point of $1,140.

As for the Mad Hedge Technology Letter, it covered its short in Apple (AAPL) for a small loss.

Q4 earnings reports are pretty much done, so the coming week will be pretty boring on the data front after last week's fireworks.

On Monday, March 18, at 10:00 AM EST, the March Homebuilders Index is out.

On Tuesday, March 19, 8:30 AM EST, February Housing Starts is published.

On Wednesday, March 20 is the first official day of Spring, at last!

Thursday, March 21 at 8:30 AM EST, the Weekly Jobless Claims are announced. At 10:00 AM, we get a new number for Leading Economic Indicators.

On Friday, March 22 we get a delayed number for Existing Home Sales.

The Baker-Hughes Rig Count follows at 1:00 PM.

As for me, it’s fundraising time here in the San Francisco Bay Area for local schools and gala balls are now a weekly event. I, who have pursued a lifelong pursuit of low prices and great deals, ended up paying $1,000 for a homemade coffee cake, $7,000 for tickets to the Golden State Warriors, and $10,000 for the best table in the house. Hey, what’s the value of money if you can’t spend it? You can’t take it with you.

Good luck and good trading.

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

March 11, 2019

Diary, Newsletter, Summary

Global Market Comments
March 8, 2019
Fiat Lux

Featured Trade:

(MARCH 6 BIWEEKLY STRATEGY WEBINAR Q&A),
(SPY), (SDS), (TLT), (TBT), (GE), (IYM),
(MSFT), (IWM), (AAPL), (ITB), (FCX), (FXE)

The Market Outlook for the Week Ahead, or the Canaries in the Coal Mine are Dying

Diary, Newsletter

Well, that was some week!

After moving up in a straight line for ten weeks, markets are now doing their best impression of a Q4 repeat.

The transports Index (XTN), the most important leading indicator for markets, has been down for 11 straight days, the worst run in 40 years.

And now for the bad news.

Look at a long term chart for the S&P 500 (SPY) and the head and shoulder top practically leaps at you and grabs you by the lapels (that is, if you are one of the few who still wears a suit).

It makes you want to slit your wrist, jump off the nearest bridge, or binge watch all nine seasons of The Walking Dead. It neatly has the next bear market starting around say May 10 at 4:00 PM EST, a rollover point I put out two years ago.

However, hold that move! As long as we have a free Fed put under the market in the form of Jay Powell’s “patience’ policy, we are not going to have a major crash any time soon. That is 2021 business.

It's more likely we trade in a long sideways range until the economy finally rolls over and dies. So when we hit my first (SPY) downside target at the 50-day moving average at $269, which is a very convenient 5% down from the recent top, could well bounce hard and I might add some longs in the best quality names. It all sets of my dreaded flatline of death scenario for the rest of 2019.

Last week saw an unremitting onslaught of bad news from the economy.

The February Nonfarm Payroll report came in at a horrific 200,000 when 210,000 was expected, sending traders to man the lifeboats. The headline Unemployment Rate dropped 0.2% to 3.8%. Average Hourly Earnings spiked 11 cents to $27.66, a 3.4% YOY gain and the biggest pop since 2009.

Construction lost 31,000 jobs, while leisure and Hospitality added no jobs at all. The stunner is that the U6 long term structural “discouraged worker” unemployment rate dropped an amazing 0.8% to 7.4%, the sharpest drop on record. Fewer jobs, but at higher wages is the takeaway here, the exact opposite of what markets want to hear.

US Construction Spending fell off a cliff, down 0.6% in December. It seems that nobody wants to invest ahead of a recession.

The dollar soared (UUP), and gold (GLD) got hammered. You can blame the slightly stronger GDP print on Thursday the week before, which came in at 2.2% instead of 1.8%. As long as Jay doesn’t raise interest rates this is just a brief short covering rally for the buck.

China cut its growth forecast from 6.5% to 6.0% GDP growth for 2019. The trade war with the US and the stimulus hasn’t kicked in yet. The last time they did this, the market fell 1,000 points. Buy (FXI) on the dip.

US Trade Deficit hit ten-year high at $59.8 billion for December, and a staggering $419 billion for the year. It’s funny how foreigners stop buying your goods when you declare war on them. Even Teslas (TSLA) are being stopped at the border in China. Who knew?

New trade tariffs hit US consumers the hardest adding $69 billion to their annual bill. Falling real earnings and rising costs is hardly a sustainable model. Will someone please tell the president?

US growth is fading, says the Fed Beige Book, slowing to a “slight to moderate rate”. The government shutdown is the cause. With Europe already in recession, I’ll be using rallies to increase my shorts. Sell (SPY) and (IWM).

The European Central Bank axed its growth forecast sharply, from 1.7% to 1.1%. Stimulus to renew on all front, including more quantitative easing. It’s just a matter of time before their recession pulls the US down. Sell the Euro (FXE).

You lost $3.7 trillion in Q4, or so says the Fed about the decline of national personal net worth during the stock market crash, the sharpest decline in a decade. You’re now only worth $104.3 trillion.

The Mad Hedge Fund Trader actually gained ground last week, thanks to profits on our short positions rising more than our offsetting losses on our longs.

I have doubled up my overall positions, finally taking advantage of the rollover in all risk assets from a historic ten-week run to the upside. I added shorts in the S&P 500 (SPY) and the Russell 2000 (IWM) against a very deep in-the-money long in Freeport McMoRan (FCX) the world’s largest copper producer.

The thinking here is that with China the only economy in the world that is stimulating its economy and the planet’s largest copper consumer, copper makes a nice long side hedge against my short positions.

The Mad Hedge Technology Letter is happily running a short position is Apple (AAPL) which is now almost at its maximum profit point. We only have four days to run to expiration when the position we bought for $4.60 will be worth $5.00.

February came in at a hot +4.16% for the Mad Hedge Fund Trader. March started out negative, down -0.84%, thanks to a wicked stop loss on Gold (GLD). We had 80% of the maximum potential profit at one point but left the money on the table at the highs.

My 2019 year to date return ratcheted up to +12.84%, a new all-time high and boosting my trailing one-year return back up to +29.92%.

My nine-year return clawed its way up to +312.94%, another new high. The average annualized return appreciated to +33.83%.

I am now 50% in cash, 20% long Freeport McMoRan (FCX), and 10% short bonds (TLT), 10% short the S&P 500, and 10% short the Russell 2000.

We have managed to catch every major market trend this year, loading the boat with technology stocks at the beginning of January, selling short bonds, and buying gold (GLD). I am trying to avoid stocks until the China situation resolves itself one way or the other.

As for the Mad Hedge Technology Letter, it is short Apple (AAPL).

Q4 earnings reports are pretty much done, so the coming week will be pretty boring on the data front after last week's fireworks.

On Monday, March 11, at 8:30 AM EST, January Retail Sales is ut.

On Tuesday, March 12, 8:30 AM EST, the February Consumer Price Index is published.

On Wednesday, March 13 at 8:30 AM EST, the February Durable Goods is updated.

On Thursday, March 14 at 8:30 AM EST, we get Weekly Jobless Claims. These are followed by January New Home Sales.

On Friday, March 15 at 9:15 AM EST, February Industrial Production comes out. The Baker-Hughes Rig Count follows at 1:00 PM.

As for me, I’ll be headed to the De Young Museum of fine art in San Francisco to catch the twin exhibitions for Monet and Gaugin. When it rains every day of the week, there isn’t much to do but go cultural.

Good luck and good trading.

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