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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.

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Presentation on theme: "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."— Presentation transcript:

1 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

2 The Mad Hedge Fund Trader Treading Water Diary of a Mad Hedge Fund Trader San Francisco, October 10, 2012

3 MHFT Global Strategy Luncheons Buy tickets at 2012 October 19 Washington DC October 26 San Francisco November 7 Houston November 8 Orlando January 3, 2013 Chicago

4 MHFT Global Strategy Luncheons Buy tickets at San Francisco October 26 Washington, DC October 19

5 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

6 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 10.00% (GLD) $160-$165 Calls Spread 10.00% (GOOG) $650-$680 Call spread 10.00% (SLV) $28-$31 call spread 10.00% (AAPL) $525-$575 call spread 10.00% Risk Off (SPY) $150-$155 bear put spread -20.00% (CORN) $50-$55 put spread -10.00% (USO) $35-$32.50 put spread -10.00% total net position10.00%

7 Performance Since Inception-New All Time High +33.1% Average Annualized Return

8 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, Ive 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

9 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

10 German Manufacturing Why Europe is in a World of Hurt How long until it spreads to the US?

11 Weekly Jobless Claims Trapped in a Sideways Range Break 400,000 and the rcession threat is on

12 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

13 (TNX) 1.40%-1.70% Range Holding

14 (TLT)

15 Short Treasuries (TBT) See the 1:4 reverse Split

16 Junk Bonds (HYG)

17 Municipal Bonds (MUB)-3% yield, Mix of AAA, AA, and A rated bonds

18 Stocks-The Gridlocked Market *Buyers and sellers have gridlocked market *QE3 raises the floor below stocks, but they wont 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

19 (SPY)- Did we just get a double top? Is the (IWM) warning us of trouble?

20 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

21 Short (SPY) 12/$150-$155 Put Spread


23 (VIX)- Going to sleep

24 (AAPL)- Long the 1/$525-575 Call spread buy this dip

25 (GOOG)- Long the December $650-$680 Call Spread

26 (FCX)

27 (CAT)

28 (BAC)- augurs for double top scenario

29 Russell 2000 (IWM)

30 Shanghai- Not yet for the double bottom

31 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)

32 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

33 Long Dollar Basket (UUP) Close to the May bottom

34 Euro (FXE)

35 Australian Dollar (FXA) Heartbreak Alert!

36 Japanese Yen (FXY) Look to sell $127-$130 September call spread again

37 (YCS) Bailed at the Top

38 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

39 Crude-waiting for QE3

40 (USO)

41 Natural Gas

42 Copper (CU)-China bounce

43 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

44 Gold -long the December $157-$162 call spread long the December $160-$165 call spread

45 Silver -long the December $28-31 call spread

46 (Platinum) (PPLT)

47 Palladium (PALL)

48 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 years crop, not this years *Obama win means ethanol subsidy become a big target, is 40% of US corn consumption *Is a short term trade only

49 (CORN)

50 Soybeans (SOYB)

51 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

52 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, dont buy Next Webinar is on Wednesday, October 24 12:00 noon EST from San Francisco, California

53 To buy strategy luncheon tickets Please Go to

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