Financial Trading Lunch 10th January 2014

Friday 10th January 2014

DISCLAIMER Users are reminded that the price of shares and the dividends thereon can go down as well as up. None of the following contents should be construed as an invitation to buy or sell securities or open spread betting positions, fixed odds bets, warrants, traded options or any other financial trading product. Readers should always obtain appropriate professional advice from their stockbroker or financial advisor before entering into any transaction in securities. U.S. Government Required Disclaimer - Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed in this presentation. The past performance of any trading system or methodology is not necessarily indicative of future results. Every effort has been made to ensure that the information contained herein, which has been derived from reputable sources is accurate but the accuracy or completeness of this information cannot be guaranteed. Futures, CFD, Margined Foreign Exchange trading, Warrants, Options and Spread Betting carries a high level of risk to your capital. A key risk of leveraged trading is that if a position moves against you, the customer, you can incur additional liabilities far in excess of your initial margin deposit. Only speculate with money you can afford to lose. Futures, CFD, Margined Foreign Exchange trading and Spread Betting may not be suitable for all customers, therefore ensure you fully understand the risks involved and seek independent financial advice if necessary. Past performance is not necessarily a guide to future performance. Any securities or financial products discussed are by way of example only and are not an invitation to buy or sell. Vince Stanzione, First Information and his agents may have a holding or open position on some of the financial markets and stocks discussed in this presentation. Copyright 2014 Vince Stanzione - First Information – This presentation is for your own use only, sharing or copying is strictly prohibited.

Financial Trading Lunch 10th January 2014 NOTE: PDF PASSWORD: RICS2014

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How they laughed…

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MARKET RECAP

4 The Obama Crash Great Buying opportunity (November 2012 – Dow 12480)

Stocks Done Far Better Than most people think

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25 years of the Dow

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S&P 500

Valuations not outrageous but no longer a bargain

NTM = Next Twelve Months – Forward P/E

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Valuations not outrageous

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My 10 year results - what can be achieved

• Anyone that started with $1 million in 2003 would now have 3.7 million profit (37% p.a) against S&P500 7% (3.7 million profit average $30,800 a month)

• Using simple range of strategies – low leverage - No day trading

• Mainly US stocks, ETFs – Spin offs been very profitable

• And that was through one of the worst financial crisis

£645,000 = $1 Million Taxes, costs, dividends not included

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How have I achieved It – Using a multi strategy approach

Special Situations

Contra Trend

TREND Following

Long and short trends lasting from weeks to years. All markets, Stocks, Commodities, FX & Indices. Looking at what the next big theme is or what's out of date (short).

Spin offs, Mergers & Acquisition, corporate restructuring, Major disasters (Japan after Fukushima)

Hated stocks (HPQ), areas that have value, stock with high litigation risks. Value such as Dogs of The Dow. Bailouts – Bankruptcy emerging stocks.

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Another good year for spin offs

Use Claymore Spinoff ETF(CSD)

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New all time highs in the Dow – S&P500 –

Yes but what about ……

Retail clients either not invested or short – Many holding large amounts of cash or in government bonds

Stocks are still under owned

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The public still don’t trust stocks

Wall Street Journal 13

Stocks have won over the long term

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Cash is a bad investment

Yes you need some emergency cash but over holding cash will reduce your long term returns

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Stocks protect you from Inflation

Does not include dividends – Gold would have storage costs pays no income

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2014 A Year Of Pick & Mix 17

2014 – Even Year – Mid Term elections 4th November 2014

Seasonality is a guide not a guarantee

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Strongest period of the year but don’t expect another 30% year for S&P500….

The numbers do not lie

Source: United-Icap

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Monthly returns 20

The US has won the Oil Lottery see February 2013 Insider Trader

• Imports less production at 17 year low

• Demand down cars becoming more efficient

• Culture change young people buying cars later

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From 15th November 2012 update

The world hardly ever comes to an end (and if it does you don’t have to worry). Yet for centuries ‘trend-extending’ has regularly predicted just such a result – based on everything from holy wars, black plague, and rising ocean levels a century ago, to nuclear weapons, depletion of the ozone layer, global warming, Y2K, communism taking over the world, etc., of more recent times.

Not so long ago the US were going to have serious oil problems, now the US is just years from being self-sufficient, with a bit coming from Mexico and Canada, the US will not need a drop of OPEC oil if current projections are correct. If you read many world food reports from 20 or 30 years ago we should have run out of Wheat and Corn by now, instead we have high rates of obesity.

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THE WORLD DID NOT END

But it’s not just Oil jobs…..

Source: Josh Bivens, “Updated Employment Multipliers for the US Economy (2003)”, Economic Policy Institute Working Paper No. 268, August 2003.

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And lower electricity prices help everyone

Good News of the USA – cannot say same for most of Europe

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Manufacturing Jobs coming back home

Source: “US Manufacturing Nears the Tipping Point” by The Boston Consulting Group (BCG), March 22, 2012.

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• United States will gain 2-3 million jobs;

and $100b in annual output; from higher

exports and production work shifting from

China over next decade

• - By around 2015, United States will have

export cost advantage of 5-25% over

Germany, Italy, France, UK & Japan in range of industries

Jobless Claims getting back to 2006 levels.. Good news for house prices

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But some serious investment will be needed

As of 2011. Source: Bureau of Economic Analysis, ISI Group.

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Stocks that should continue to well Cyclical stocks

Johnson Controls JCI BorgWarner BWA Cameron Int’l CAM Noble Corp. NE Schlumberger Ltd. SLB Marathon Oil MRO Rowan Cos. RDC Tyco International TYC Danaher Corp. DHR General Electric GE Rockwell Automation ROK Microchip Tech. MCHP Ingersoll Rand IR

Linear Tech. LLTC Xilinx XLNX Cisco CSCO Analog Devices ADI Qualcomm QCOM JDS Uniphase JDSU Jabil Circuit JBL MeadWestvaco MWV Air Products & Chemicals APD Praxair PX Dow Chemical DOW NCR Pentair PNR

SPDR Industrials ETF (XLI)

A play on capital equipment spending

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Financial Trading Lunch

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SPDR Financials ETF (XLF)

Still value in Financials

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SPDR Home Builders ETF (XBH)

Homebuilders coming back from the dead

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S&P/Case-Shiller US Home Price Index Tracking changes in the value of residential real estate both nationally as well as in 20 metropolitan regions.

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US Existing Home Sales Inventory – Need more supply

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US 30 Year Fixed Mortgage Rates

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STOCK NAME PRICE Paid P/E forward YEILD

MTW Manitowoc $23.20 12.80 11.5 .4%

TEX Terex $40.20 20.00 9.6 0

MWA Mueller Wa $9.40 2.50 21.6 1%

USG USG $29.00 $11.00 8 1.3%

Masco MAS $22.0 $10.00 10.8 1.27%

Fortune Home FHBS $44.0 0 (spin) 22.0 1.0%

Housing Related Stocks I Own

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STOCK NAME PRICE BOOK P/E forward YEILD

BAC Bank of America

$15.00 21.92 10.3 .3%

C Citigroup $53.00 63.50 9.6 0.08%

AIG AIG $50.00 52.00 10.6 Just started

Hartford Fin HIG $35.00 $48.00 8 1.3%

Sun Trust STI $37.00 $39.00 10.8 1.27%

Met Life MET $53.00 $58.00 7.5% 2.56%

Banks & Financials below book

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Bank Of America (BAC) Back to Book Value $20+

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US householders rich again thanks to stocks and house prices

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How High can we go?

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A few bumps in 2014 with mid term elections but overall higher

Yes interest rates are going up but nothing drastic

10 Year Yields

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U.S. Interest rates

Rates moving up but not back to 14%

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What worked in 2013 43

2014 Dogs Of The Dow

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Small Dogs – 5 lowest prices Enhance with a margin loan? – currently 8.5% with Schwab

Japan Small Caps (DXJS)

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Summary – Why you should stay with stocks

Sentiment Many still don’t believe the rally and stocks are under owned. Yes short term a few bumps but overall we go higher.

Interest Rates Rates will move higher but hardly drastic moves, Fed will continue to be friendly to markets. 2016 will be the next US election.

Fundamentals USA in great shape. Banks have good balance sheets, consumer is in better shape, Energy windfall will help, Jobs coming back.

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Best Opportunities 2014 – Small cap US

stocks and sectors

Vince Stanzione MMXIII

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The big dogs takeover the small – expect more mergers, takeovers and PE (private Equity) deals We a have already had a string of deal in 2013 Why? Big caps have large cash balances Financing is fairly easy to obtain and interest rates are low. Small caps are more news and story driven so its less important what the S&P500 does.

Small cap Shares ETF near record highs 49

10 Largest holdings

1. Towers Watson & Co. (TW)

2 Fortune Brands Home & Security Inc. (FBHS)

3 NCR Corp. (NCR)

4 Cooper Cos. Inc. (COO)

5 Genworth Financial Inc. (GWN)

6 Hanesbrands Inc. (HBI)

7 Gannett Co. Inc. (GCI)

8 Jarden Corp. (JAH)

9 Snap-on Inc. (SNA)

10 Fidelity National Financial Inc. (FNF)

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5 years on in Biotech

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Last 5 years boom time for Biotech

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Some smaller cap holdings

• ARWR – Arrowhead Research

• OMER – Omeros Corp

• LGND – Ligand Pharmaceuticals

• RMTI – Rockwell Medical

• OPK – OPKO Health

HIGH RISK

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Twitter is now often the go to source for breaking news

Twitter search Using the $ prefix and filtering

Come gather 'round people Wherever you roam And admit that the waters Around you have grown And accept it that soon You'll be drenched to the bone If your time to you Is worth savin' Then you better start swimmin' Or you'll sink like a stone For the times they are a-changin'. Bob Dylan

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Raw twitter feed

Twitter where everyone can have their say

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Processed feed

Twitter feed can be sorted – Trending companies can be highlighted quickly

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Chartmill.com

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Steps to shorter term trading

Gather Data from Blogs, Websites, Twitter, SEC fillings – IG client sentiment

Filter Tools such as finviz.com sticktwits.com chartmill.com tradeonmarkets.com

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Trade Trade either long or short based on the information. Manage position – Exit

Smaller companies – Healthcare - Biotech

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Short term trading

• In 28 years of doing this – what I know for certain:

• 1. Retail customers are normally wrong over time so good contra indicators

• 2. When they are right they take profits too soon

• 3. They overleverage and have to be right instantly and get stopped out

Using the crowd as a contra Indicator

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IG Clients – 8th Jan

Use 80% + sentiment as a contra indicator

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Euro holding up

84% short – Clients short and wrong!

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Free from marketwatch.com

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Short Interest – Do the opposite

• Using Finviz to filter 52 week highs with high short interest – (reduce weeks if your not finding anything)

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Using the VIDYA for shorter term trades

• VIDYA is the short form of Variable Index dynamic Average. It was developed by Tushar Chande and first presented in 1992 in his article in the journal Technical Analysis of Stocks and Commodities (PDF on site)

• VIDYA is a combination of Adaptive Moving Average and Exponential Moving Average. It gives weight to recent data based on volatility of the data series, more the volatility more the weight to recent data

• VIDYA effectively compensates for trading (frequent price fluctuations in a short period) and trending (a consistent direction of price over a longer period) times. During trading times short-term averages give many false signals, while long-term averages give late signals in trending times. With the smoothing constant as well as volatility index in its formula VIDYA adjusts its sensitivity in trading as well as trending time

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• Don’t worry about the total ins and outs or the formula – Sharescope has programed it in.

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VIDYA 21 and 6 days 67

Short term system Buy/Long • 21 day VIDYA and 6 day VIDYA crosses

• 20 day high low channels – Dochian Channels as stops

VIDYA smoother than SMA

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Short term system Sell/Short • 21 day VIDYA and 6 day VIDYA crosses

• 20 day high low channels – Dochian Channels as stops

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SEC Hedge Fund Data

• 13F Form 13F—Reports Filed by Institutional Investment Managers

• An institutional investment manager that uses the U.S. mail (or other means or instrumentality of interstate commerce) in the course of its business, and exercises investment discretion over $100 million or more in Section 13(f) securities (explained below) must report its holdings on Form 13F with the Securities and Exchange Commission (SEC).

• Form 13F is required to be filed within 45 days of the end of a calendar quarter.

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http://www.insidermonkey.com

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The 13F Heat Map for the quarter ending 09/30/2013

http://whalewisdom.com/report/heat_map

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Putting it all together

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A final few words of wisdom…. Market’s Emotional Roller Coaster

The majority BUY on Euphoria and SELL in Despair

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vince@finbets.com

Friday 10th January 2014