"So all the volume in international equities was in the gold and precious metals area and that got me into the gold business," Thomas says. "The business I built up after that was all Japan-focused. Japan was the world’s largest foreign stock market at the time. Plus there was a huge economic boom going on. Japan was like China is today."
The Mad Hedge Fund Trader newsletter tends to avoid specific futures market recommendations because most readers are not qualified, have no experience and can’t open online accounts, while professionals who subscribe generally are not commodity trading advisors (CTAs) or don’t want to register with the CFTC. "They play the ETF equivalents," Thomas says.
But he says his own account is "into futures all the time. For me it’s easy." He recently has been in the position of going short many commodities he had previously been long as part of a "risk on, risk off" strategy tied to what he sees as strong prospects of a "Great Crash" and recession in the coming year. "I have silver right now," he says. "Oil I’m out of because it is too expensive. I’m looking to short it. And gold I have been playing from the short side since it peaked at $1,920."
Thomas says he is still a long-term advocate of hard assets investments "but you don’t want to own them in a recession. You know, every time they have a dance they always invite the same girls: commodities, precious metals, oil, hard assets of any kind, bulk commodities like zinc, tin and copper.
"That’s the way it’s going to be for 30 years. All those people in emerging markets want to increase their standard of living. That demand is going to keep growing. It will take five to 10 years to bring the supplies on. So all you have to do is stay out of the way during the recessions, which is just what I’ve been doing."
He also recommends selling currency rallies, forecasting an eventual decline of the euro to parity with the dollar and noting that the structural problems in Europe could take years to resolve. "I’m not a perm-bear, I’m a trader. I don’t really care if the markets go up or down as long as I know in advance which one they are doing," he says. "If you do the hard research you can get that right most of the time, although not all the time."
Thomas also does his own charts, noting that the world’s best chartists generally cherry pick their charts based on fundamentals. "All the best hedge fund traders do that," he says.
He has utilized trading experience and contacts to better understand global market fundamentals. He claims four Federal Reserve governors subscribe to his newsletter. He also has parlayed early career interviews with Chinese senior leaders like Deng Xiaoping and Zhou Enlai into a position as an official advisor to China’s Ministry of Finance and the People’s Bank of China. "Their questions to me are far more valuable than any answers that I’m able to give them," he says.
Given China’s influence on the global commodity markets, that is a pretty good pipeline of information.