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The Mad Hedge Fund Trader

The Mad Hedge Fund Trader. Harry S. Dent Investment Conference The View from 90,000 feet November 11, 2011 www.madhedgefundtrader.com. Welcome to the “RISK OFF” Trade.

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The Mad Hedge Fund Trader

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  1. The Mad Hedge Fund Trader Harry S. Dent Investment ConferenceThe View from 90,000 feetNovember 11, 2011www.madhedgefundtrader.com

  2. Welcome to the “RISK OFF” Trade *We live in a binary world*”RISK ON” or “RISK OFF”*It’s all or nothing*Driven by the rise of hedge funds, CTA’s, short term trading, high frequency and momentum traders*Nowhere to hide, hedges don’t work*Cash yielding nothing is the only low risk asset class

  3. It’s All About the Economy *Growing economy=“RISK ON”, buy:stocks, emerging markets junk bonds commodities precious metals foreign currencies especially the Australianand Canadian dollars commercial real estate & multifamily dwellings*Shrinking economy=“RISK OFF”, buy:the safe haven plays, including: the US dollar, Japanese yen US Treasury bonds Sell short “RISK ON” Assets

  4. The Wily Coyote Economy *Horrific H1 GDP is a major drag on risk assets from forecast 4% down to 0.9% actual*High oil and commodity prices took their toll, triggered ECB 50 BP rate rise*Public sector is huge drag on economy end of stimulus, state and local lay offs,*Secular deleveraging of balance sheets and the consumer*End of QE2 means goodbye to$75 billion/month of fed buying*Traditional driver of housing is missing in action*The Japanese tsunami and the European banking crisis are a huge drag

  5. Weekly Jobless ClaimsThe Canary in the Coal MineComes out every Thursday Morning October 4RISK ON April 29RISK OFF The one economic statistic you want if you are stranded on a desert islandCalled the current downturn at the end of April

  6. Equities (SPX) April 29RISK OFF October 4RISK ON

  7. Treasury Bonds (TLT) October 4RISK ON Feb 6bottom April 29RISK OFF February 4RISK OFF

  8. US Dollar Basket (UUP) October 4RISK ON 4-29bottom April 29bottom April 29RISK OFF

  9. Copper Led the “RISK OFF” Trade in April April 29RISK OFF October 4RISK ON

  10. Silver Led the Next Leg Down (SLV) April 29RISK OFF April 29top October 4RISK ON

  11. Next Came Oil April 29RISK OFF October 3RISK ON

  12. Yes, Rare Earths Were Affected Too Cerium Metal 99% FOB China

  13. Any Rallies in the Dollar Are Only TemporaryUS Dollar Priced in a Basket of Hard Goods 1790-2010 *It’s been going on for 220 years*United States started out as a bankrupt country*Is the plight of all fiat paper currencies*Bear market rallies can last 20 years, 3 years in modern history

  14. The Recession is Not Here Yet *Corporate profits growing at a 17% annual rate 50% of S&P earnings from abroad because they’re not hiring people*Recovery of the US car industry to 13.5 million units a year, replacements at 14 million units*Second leg of the “V” shaped recovery in Japan*Leading and coincident economic indicators point to a few more quarters of 2% type annualized growth*ECB rate cut will be a boost

  15. The Great Crash of 2012 *Long term structural issues overwhelm short term positives*Corporate profits reach diminishing returns*2009 stimulus spending runs out*Bush tax cuts expire*There will be no QE3*Huge demographic headwinds bring another leg downin the residential real estate market*Falling home prices bring secondary banking crisis,but this time no TARP and no bail outs*Gridlock in Washington prevents any real solution*Unemployment remains stuck at 8-9% level, then soars to 15%

  16. How Low Can They Go?Case-Shiller Real Estate Price Index End of Fannie Mae and Freddie Mac, retiring baby boomers,few Gen X’ers, 10 million inventory, rent, don’t buy, rents going up

  17. Déjà Vu All Over Again *A repeat of 1937*Dow Average fell 50% over 5 years*Premature end of government stimulus brought the second leg of the Great Depression*Economic downturn didn’t end until the stimulus package known as WWII started a 25 year bull market

  18. Dow Average 1900-2011 1937 1942Midway

  19. The Three Black SwansSurprises not discounted by the market *ECB cuts interest rate, Trichet retirement paves the way for Draghi action, there’s a new fire chief in town*Supercommittee Surprise compromise$4 trillion compromise from last summer is revived, Dow rallies 1,000 points by year end*China cuts interest ratesdeclares victory on inflation, says risks to economy are now on the downside, its off to the races for emerging markets

  20. The Crash PortfolioHow to Make Money in the Next Collapse *Stocks-sell rallies in the (SPX) up to 1375, emerging markets get hit hardest*Bonds-buy dips, around 2.60% in the 10 year is ideal*Commodities and oil-sell rallies over $100/barrel*Foreign Currencies-sell rallies in Euro to $1.42, buy dollar*Precious Metals-sell rallies in gold to $1,900*Volatility-Buy dips to low $20’s*Real estate-from bad to worse, rent, don’t buy, another 25% leg down

  21. Major Long Term Trends ReassertAfter the “RISK OFF” bring back the “RISK ON” *The growth of the global population*The rise of the emerging market middle class*The scarcity of essential natural resources*The shift from paper to hard assets*Demographic investing*The rise of technology*Deflation and then inflationResumes in two to five years, 2014-2018

  22. The Happy Ending *Technology is accelerating far faster than anyone realizes*No one big invention, but thousands of small oneswill aggregate to create a leveraged effect*Information technology*Energy-conventional and alternative*Health care*America is great at rising to meet a crisis,the crisis we had in 2008 wasn’t bad enough to force a solution, therefore, that solution forcingcrisis is ahead of us. Is it the crash of 2012?*tubes-transistors-microprocessors-personal computers-Internet-smart phones-tablets-???

  23. The Value of Predictions 1895“Heavier than air flying machines are impossible.” --Lord Kelvin, president of the Royal Society.1927 "Who the hell wants to hear actors talk?" --H.M. Warner, founder of Warner Brothers.1943 “I think there is a world market for maybe five computers .” --Thomas Watson, Chairman of IBM.1962 “We don't like their sound, and guitar musicis on the way out.“--Decca Recording Co. rejecting the Beatles, 1962.1981 “640 kilobytes of memory ought to be enough for anybody.” --Bill Gates, founder of Microsoft.

  24. The Mad Hedge Fund Traderwww.hsdent.com/dispatch *Global Trading Dispatch trade mentoring service *trade alerts with specific entry and exit points*daily 10 page research newsletter *password protected website *biweekly strategy webinars *accounting support for your own virtual hedge fund* $1,997 a year

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