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Trader's Corner 2006

Discussions about the economic and financial ramifications of PEAK OIL
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Where will the price of WTIC oil be on December 29, 2006?

Less than $50
3
No votes
Around $55
4
No votes
Around $60
7
No votes
Around $65
15
No votes
Around $70
58
No votes
More than $80
101
No votes
 
Total votes : 188

Re: Trader's Corner 2006

Unread postby MrBill » Fri 09 Jun 2006, 08:33:53

Well, I certainly misjudged sentiment this morning. Thought we would see some follow through selling on the back of metals and commodities lower and a bearish daily chart, but apparently there was a large buyer of diesel fuel in the gasoil market, and this is what set about a round of profit taking on short positions as well as speculative longs below $70.00?

$this->bbcode_second_pass_quote('', 'M')arket comment
Gold: End of day firmness from Wednesday quickly evaporated on Thursday as comments from ECB rates meeting were rather dovish. Moving from 627 to 620 on the FX moves and falling further and as the death of Zarqawi was announced, gold reached 610 as oil tumbled $1.50. Ongoing profit taking and selling on USD strength continues to pressure the yellow metal, which looks likely still to test technical and psychological support at 600. With rallies being sold overnight, Friday has opened quietly ahead of US trade data this afternoon and the start of the World Cup.

Silver: Cousin silver suffered a similar dismal day to gold. Having already moved lower in Asia, the metal continued to fall on follow on selling. From 11.88 in Asia, silver had reached 11.63 in early European trading and despite a brief rally continued lower to 11.10 by the NY close. Dips towards 11.00 have attracted bargain hunting interest so far this morning, but without a significant break higher, silver looks poised to test below 11.00 in the near term.

Platinum: Despite holding earlier above 1,220, platinum turned further south yesterday, heading towards 1,180. Consumer interest on the downside was evident in the low 1,200s and the industrial precious metal did not slip below here until later in NY trading. Closing at 1,187, platinum now faces resistance above 1,200 and may be hampered in any recovery by weaker performances across the other precious and base metals.

Palladium: Sister metal palladium continued Wednesday’s slide and broke again below 330 yesterday and below the 100dMA. Consumer and other buying interest was evident towards 310, but continuing profit taking and liquidation suggest that an immediate recovery is unlikely.


Of course, will wait for NY to come in ahead of the weekend, but the mood is one of closing risk. Also, the S&P energy index is up about 3.5% today, so some oil cos. that looked cheap yesterday have recovered overnight.

Bought some ConocoPhillips and Lukoil as they are down -15% and -25% off their respective highs versus crude that is down -6 -7%. I think these oil companies can still make money with oil around $70, and going into 'the anything can happen season', COP may benefit from hurricane disruptions now that they are a gas company, too. If not, COP will be sitting on the bid for Lukoil shares should they dip much further, hoping to build their 17% stake to 25%.

Lukoil is in the news. Building-up stakes here, doing deals there. They are a company on the move. They are looking to buy into a refiner in Rotterdam now amoung other downstream assets as well as doing asset swaps with oil cos. in Russia itself.

Think this rout in emerging markets has been way overdone. There has to be more discretion amoung investors between Russian country risk and Brazil or Turkey for example. You cannot even compare them directly anymore. They just share the same class of investor is all. Therefore, a 25% drop in Russian shares presents a good buying opportunity for me, combined with oil & gas prices being lower.

Also bought some BASF as a proxy for the European gas market and for Gazprom. As BASF will be one of Gazprom two partners, along with E.On, for importing natural gas from Russia via a new pipeline under the Oestsee. And I think they are well supplied for their other value adding refining and chemicals business. Wanted to buy them before, but they were too expensive. These rate hikes helped to lower the overall market, while energy came off in general. Looking for other euro investments, but it is not easy and now is the wrong part of the cycle for bonds.


Well, good luck and have a nice weekend. Cheers.
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Re: Trader's Corner 2006

Unread postby Chaparral » Fri 09 Jun 2006, 13:53:02

This week has been hilarious...sort of. I set some limit orders from 6970 to 7050 to progressively exit my shorts Wednesday night based on where I think things should end up based on chart action etc. I get wind of the Zarqawi news at the gym, leave a little before closing time to try and get home in time to adjust my stops lower and BOOM! they've all been filled. Wake up the next morning to see 6910 and finally go long at 6940 for CL and 20600 for HU. I remained bullish on 1) the chart and 2) the fact that everyone here in the states is still shyting bricks over hurricane season 3) the fact that Zarqawi's elimination won't do a damn thing for the Iraq situation and It'll take the traders all of 15 minutes to figure that out. 4) the fact that it seems like everytime a mouse farts in Iran or a cat coughs up a hairball on the loading dock of some Texas refinery, the market uses it as an excuse to drive up the price. Looking at that I'm just waiting waiting waiting for the first swirly white thing to show up in the Atlantic: then I'll sell :twisted: In the short term, If I had to hazard a guess, I'd say I'll exit these longs on Tue or Wed at around 7300ish/22000ish.

Didn't play with metals this week. Grains and energy and Euros keep me busy enough......

Regarding the CME real estate futures, I don't really wish to touch those with a ten foof pole....yet. In my area which is Southern California, prices are still inching up albeit on reduced volume. I am becoming increasingly of the opinion that we may not see a real estate in nominal dollars but rather a crash in terms of real dollars, and all that is required for that is minimal to no increase in prices. Everyone thinks that real estate is just holding steady while the fiat currency in which that price is denominated just keeps flying off the printing presses at record rates. I've a feeling the public will try and short, and being the public, they will get slaughtered. This is a game which I do not wish to play unless I can deduce the trend, get in in the morning and get out with the other guy's margin money by the afternoon and then go have a cup of coffee.
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Re: Trader's Corner 2006

Unread postby The_Virginian » Sun 11 Jun 2006, 04:13:10

++"I a+am becoming increasingly of the opinion that we may not see a real estate in nominal dollars but rather a crash in terms of real dollars, and all that is required for that is minimal to no increase in prices. Everyone thinks that real estate is just holding steady while the fiat currency in which that price is denominated just keeps flying off the printing presses at record rates."

Totaly agreed.

Inflation will prop up housing for a while...real goods will go up, money will be harder to come by...due to higher rates...prompted by high oil/energy prices etc.

Not pretty.
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Re: Trader's Corner 2006

Unread postby truecougarblue » Mon 12 Jun 2006, 13:48:06

My mining shorts got covered Friday with a decent gain, so my model holds up. I was conservative with my stop so I could have done better into today, but dukat is right in my opinion that these times should be played carefully.

I'm back at cash and I'll be looking at where things are headed in the next few days. I'm expecting a near term long run which I'll play through GLD and a mix of miners.
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Re: Trader's Corner 2006

Unread postby greenworm » Mon 12 Jun 2006, 15:18:37

I am thinking about covering my short position, I'll probably do it by the end of today. All this doom and gloom has got to change sometime, plus the dow is touching october support levels and I know that is bound to wake up some traders and put them in the buy mentality.
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Re: Trader's Corner 2006

Unread postby MrBill » Tue 13 Jun 2006, 03:33:09

Sorry for my absence, was in the Republic of Northern Cyprus over the weekend. The Turkish side of the island is beautiful. Not that it is going to stay that way. Real estate development and building like you cannot believe.

All being sold to British tourists. It is bound to choke the Golden Goose. All those pristine beaches and small fishing villages gone. Trampled under by the Great Washed Masses that want battered fish & chips and ale instead of fresh fish meze & local wines.

All that rich farmland and local growers paved-over and pushed-out to make room for more luxury villas with a sea view. Olive groves torn-up and replaced with strip malls and gas stations to service all those holiday makers and retirees.

But maybe the joke will be on them? Cyprus and the rest of the world outside of Turkey have never recognized The Republic of Northern Cyprus, and much of the land on which all this development stands is contested since the invasion and partitioning of the island. Therefore, many of those commercial contracts may someday declared null & void. Not too mention they do not have the water to support all that extra growth and its swimming pools and air conditioning! Oops!

Another sympton of too much global liquidity finding its way into an over expansion in residential real estate and leisure property development, which is in no way tied to increases in real productivity that might support the local economy after the bubble collapses, or indeed when falling housing prices deflate property values abroad as many of these villas are, you guessed it, being bought on credit or secured on home equity loans based on UK real estate values. Oops again! ; - )

I attach this for your reading. Perhaps a timely reminder that the basics not only still apply, but they always apply!

$this->bbcode_second_pass_quote('', ' ') The best investing advice is simple, timeless, paradoxical -- and often ignored. Yes, ignored, because so many investors cannot make decisions. Lacking self-confidence, they rely on the random flow of breaking news.
That overwhelming rush of new information, all of it short-term, drowns out the investment advice to which we should be adhering. Those timeless principles demand that we ignore breaking news and take personal responsibility, a very scary idea for investors who have lost their self-confidence.
This message has been summarized by the Chinese master Lao Tzu: "Those who know do not speak, those who speak do not know." He offered this investment advice three thousand years ago in the Tao Te Ching. Test it on any guru: Gross, Siegel, Bogle, Cramer, Bernanke, Paulson, and yes, even me. Of course, if investors took Lao Tzu's advice, Wall Street would be out of business. You'd be in command!
Tao of the market, where silence is golden


Crude starts (my) week lower as Hurricane Alberto is likely to weaken as it nears Florida. Still a reminder that 'the anything can happen' season has now officially started. Cheers.
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Re: Trader's Corner 2006

Unread postby Revi » Tue 13 Jun 2006, 08:15:04

All my measly investments have taken a hit recently, but I'm hanging on to them. Silver is down, Evergreen Solar is down, land is even down. Let's see, what's left? Well the sun is shining, so my solar investment is making money on the house. Every shower the kid takes is heated by the power of old sol. I guess I can't complain too vociferously.
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Re: Trader's Corner 2006

Unread postby Daryl » Tue 13 Jun 2006, 09:27:53

Hi Mr. Bill, hope all is well. This looks like a good spot for long term silver buyers. Your thoughts?
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Re: Trader's Corner 2006

Unread postby greenworm » Tue 13 Jun 2006, 09:53:21

truecougarblue,

Shoulda waited one more day, Bernanke was speaking today. I watched gold all night and early morning to make sure it was still falling like a brick. I covered my short today. :lol: I think I'll go take a long nap. :lol:
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Re: Trader's Corner 2006

Unread postby MrBill » Tue 13 Jun 2006, 10:21:15

$this->bbcode_second_pass_quote('Daryl', 'H')i Mr. Bill, hope all is well. This looks like a good spot for long term silver buyers. Your thoughts?


Hello Daryl, long time no hear. How's your other brother, Daryl? ; - )

Really missed this move quite big time here. No time to trade. Basically, up to my neck in margin calls and they were starting to add-up even as the willingness of lenders to extend credits has more or less fallen along with the price of shares. Typically, market liquidity tends to dry-up just as the traders need it most, so they end-up closing positions they would sooner to hold onto exacerbating these down moves. For us it is not the credit issue, but physically delivering that many shares as collateral. Need to convert shares into depository receipts, and as was a long weekend for us, we were caught flat footed by this last move lower.

I think they call it a Broad Cross Market Selloff, but in all honesty it was telegraphed well in advance. Remember all those posts about central banks removing liquidity and raising rates?

As for silver and other markets just have these comments from this morning.

$this->bbcode_second_pass_quote('', 'T')he six-month correlation between U.S. 30-year yields and oil shot up to a 15-year high of more than 80 percent last month, and is still close to that level, she said last week.

The 30-year yield's rise to highs in May reflected both inflation expectations and the outlook for strong global economic expansion. But economists have recently started to downgrade expectations for growth in gross domestic product, the sum of all goods and services produced in the United States.

"As far as long real yields reflect market expectations of future GDP growth, the recent decline in market risk appetite has led to declines in both oil prices and long-term yields," Komileva said.

As long-dated bond yields have slipped from their highs in recent weeks -- while crude oil and global equity markets have fallen -- the oil-bond correlation has held good, perhaps now indicating that inflation concerns are abating as investors worry instead that economic growth will slow in the long term.
Long bond mimics oil price with inflation in view

Sure is suspect with all these formerly uncorrelated markets moving in tandem and a sure sign of a panicked exit (likely due to those credit issues I mentioned?). Will post more when I have time. Good luck. Cheers.
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Re: Trader's Corner 2006

Unread postby MrBill » Tue 13 Jun 2006, 10:44:57

$this->bbcode_second_pass_quote('Revi', 'A')ll my measly investments have taken a hit recently, but I'm hanging on to them. Silver is down, Evergreen Solar is down, land is even down. Let's see, what's left? Well the sun is shining, so my solar investment is making money on the house. Every shower the kid takes is heated by the power of old sol. I guess I can't complain too vociferously.


Dollar for now, until the dust settles and then maybe back into some cheaper commodities, like natural gas, or take a look at foreign currency plays like ruble investments? Will re-assess as soon as get my feet back under me and hope that these margin calls slow to a trickle otherwise fund raising will become a full-time job instead of a nice business trip to Frankfurt, Munich and Vienna to see friends and chat that I planned it to be! ; - )

$this->bbcode_second_pass_quote('', 'T')he only saving grace for the greenback may be the lack of safe-haven alternatives -- and that hardly amounts to a resounding vote of confidence in the currency.

The most attractive safe-haven currencies tend to be from countries running current-account surpluses. That, said Bernard Connolly, global strategist at Banque AIG in London, rules out the most liquid dollar alternative: the euro.

A mismatch of competitive and noncompetitive economies, the 12-country euro zone also includes retrograde governments which run huge current-account deficits of their own.

The Swiss franc, the usual place to park money in times of risk, is a better bet -- but a much smaller market.
Dollar gains a flight to liquidity, not quality
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Re: Trader's Corner 2006

Unread postby Anthrobus » Tue 13 Jun 2006, 10:55:11

$this->bbcode_second_pass_quote('MrBill', '
')I think they call it a Broad Cross Market Selloff, but in all honesty it was telegraphed well in advance. Remember all those posts about central banks removing liquidity and raising rates?


right. I sold my small package of stocks in a sense of urgency a few weeks ago. The stocks rose still a few points in the coming weeks, then began the actual selloff.

It was really written on the wall. My scenario was a rising oil price, lower dollar, higher interest rates, housing market crash and a selloff at stocks + higher gold, inflation preassure rising constantly in the coming years. I had a quite doomerish vision then.

But now gold is sharply lower, the dollar gaining against the €, no news from the housing market crash, oil price stagnant, interest rates only slightly higher. Everywhere talking of inflation fears instead.

Have i done the right thing from mostly wrong expectations?
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Re: Trader's Corner 2006

Unread postby Chaparral » Tue 13 Jun 2006, 15:00:42

Went long one August gold at 590. What a waste that turned out to be, after I took a decent little profit yesterday doing the same thing at the same time of morning and selling about 90 minutes later. Took profits in July Wheat though; now seemed to be as good a time as any.

My grain shorts kept the margin calls away today. I notice that CL sort of edged back up towards the end unlike quite a few other commodities, including HU.

The grains, especially July corn didn't drop that sharply compared to earlier this week and last. I think I'd better take profit on the july corn shorts as soon as the access market opens this afternoon.
It just keeps hitting that floor in the low 240s.

I'm now long too many different things for comfort. It's nice to have short positions in a few other things as a hedge. Unfortunately the USD doesn't fill the bill here and the Euro has given up a big chunk from its highs a week and a half ago.

Let's see what the Asians do in a few hours.

Any bets on whether the oracles will use today as an excuse to throttle back on the rate hikes?
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Re: Trader's Corner 2006

Unread postby Daryl » Tue 13 Jun 2006, 16:49:22

Well, anyway. 550 and 10 look like pretty big support points for Gold and Silver to me. Be real suprised if we just blew right through them. I think long term bulls should be very happy to buy Silver between 10 and 11. Feel sorry for any liquidity providers in the Silver market. Must be vicious trying to execute trades for these funds. I do understand the point about position liquidation due to margin calls in other markets. No doubt that has exacerbated the move in commodities.
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Re: Trader's Corner 2006

Unread postby truecougarblue » Tue 13 Jun 2006, 17:02:59

greenworm et al,

Yes, I kick myself for being squeamish on the short, but it's still a good feeling when a market does what you expect.

I personally feel much better about long trades in the metals, and I'll be going long a soon as tomorrow if it starts to turn. It really blew down through my 590 point so I'm not entirely convinced we've see the end of this bear cub. If wee see soome strength through noon tommorow I'll be ack on board.

Anybody want to take a stab at explaining the correlation between the 3 month charts for the Dow and GLD? My best guess is that the lowering tide of liquidity is sinking all ships.

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Re: Trader's Corner 2006

Unread postby drew » Tue 13 Jun 2006, 20:09:47

I am SO glad I got my regular nuts replaced with brass ones last month, plus a lobotomy....

Seriously, the portfolio is down about 10% on the week...

As many here know I am well diversified across all the important commodities (as opposed to asset classes)... so I am feeling the kick in the niuts more uniformly..

wait, isn't brass supposed to dull the pain...

Luckily, I'll just wait it out...

I still have my job, no need to liquidate at a loss.....

If I wasn't so sure of myself this would probably suck...

;-) ....... ;-(

lol

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Re: Trader's Corner 2006

Unread postby MrBill » Wed 14 Jun 2006, 03:47:46

$this->bbcode_second_pass_quote('Daryl', 'W')ell, anyway. 550 and 10 look like pretty big support points for Gold and Silver to me. Be real suprised if we just blew right through them. I think long term bulls should be very happy to buy Silver between 10 and 11. Feel sorry for any liquidity providers in the Silver market. Must be vicious trying to execute trades for these funds. I do understand the point about position liquidation due to margin calls in other markets. No doubt that has exacerbated the move in commodities.



Measuring back from 2001 in the silver, I get a 0.382R from $4 area to $15 area as being around $10.50 and the 0.500R as being near $9.50, although based on the momentum it might easily go back to the 0.618R of $8.10 or so? Therefore, would look to buy between $9.60 and $8.25 if that is the way you're bent?

Measuring back from 2001 in the gold, I get a 0.382R from $260 to $730 area as being around $540 and the 0.500R as being near $490, but unlike the silver there seems more support and a pullback to the 0.618R of $430 seems highly unlikely? One would think that $500 would be a big psychological level for the bulls? Then they would double their money when it spikes to $1000? ; - )

Crude is down, down, down and I am the biggest loser! No, I have not lost any money, but I could not pull the trigger yesterday and get short. So much for discipline!

On the daily chart using 21-day moving averages and trading envelopes that are 2-standard deviations from the mean, the bottom end of the range should be $67.78 in the WTI. Would look to buy OTM options with a SEPT maturity at that level for some upside protection.

On the futures, there is a long-term channel support line coming in at around $65.00 on a move through support at $66.88 moving average. It depends on today's inventory nos. with the Brent contract maturing this week and WTI next week. If there is another large build in gasoline (f/c +1.40 mio bbls) then this would be the 7th week in a row and be enough of a bearish factor to drop us back into the $65-70 range instead being an excuse to buy? Certainly the Iran and Iraq risk factors have subsided somewhat and there is no support coming out of the other commodities at the moment. To put it another way, if not now, then when?


Today's DOE forecasts are

Crude f/c -700K bbls to 346.6 mio bbls
Gasoline f/c +1.4 mio bbls to 210.3 mio (+4.9% YOY)
Distillates f/c +1.25 mio bbls to 120.7 mio bbls
Refinery Runs f/c +0.4% to 91.40%

But just to put it in context, according to the IEA, 85% of growth in demand came from non OECD countries, so perhaps it is worth keeping Chindia growth prospects in mind rather than obsessing on US centric numbers?

Worldwide demand 84.9 mpbd. Increase in demand according to the IEA

2003 +2.0%
2004 +4.1%
2005 +1.3%
2006 +1.5% or 1.24 mbpd
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Re: Trader's Corner 2006

Unread postby drew » Wed 14 Jun 2006, 07:37:30

You know Mr. Bill, despite our respective woes I love this stuff!!!

All week the sheeple in the office are going 'oh my god the sky has fallen'

That is somewhat amusing anyways....

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Re: Trader's Corner 2006

Unread postby MrBill » Wed 14 Jun 2006, 08:46:17

$this->bbcode_second_pass_quote('drew', 'Y')ou know Mr. Bill, despite our respective woes I love this stuff!!!

All week the sheeple in the office are going 'oh my god the sky has fallen'

That is somewhat amusing anyways....

Drew


$2 trillion is a lot of dosh, but if we start to truly unwind, I think this is only the start of a deflating bubble, which may spread to housing values next. Perhaps emerging markets, commodities and junk bonds only got hit first because they are the most liquid?

$this->bbcode_second_pass_quote('', ' ')
The month-long slide in global stocks has wiped out at least $2 trillion in wealth, leaving investors few alternatives to preserve their holdings aside from bonds and money markets.

Investors have been dumping stocks, commodities and emerging market assets on growing concerns that economic growth will suffer from higher inflation and interest rates.

"It is essentially one consistent story worldwide, starting here in the U.S. There is a fear that the Fed's repeated commitment to limiting inflation demonstrates a willingness to risk economic activity," said Christopher Low, chief economist at FTN Financial in New York.


Stock markets have been punished since the U.S. Federal Reserve raised interest rates for 16th time in a row on May 10 and issued a hawkish statement saying it may need to do so again to fight inflation. Investors had expected some sign of an end to the tightening cycle.

Global markets have suffered since, and strategists show little agreement about how deep and how long the sell-off will go. Bonds have been the most direct beneficiary of the equities route, with benchmark U.S. 10-year Treasuries <US10YT=RR> staging their longest rally of the year since mid-May.
Global equity meltdown costs investors $2 trillion

So far our stock is down about 35%, so nearing the 0.382R I warned about in April of 2004, as I wrote out our hedging strategies to protect ourselves against such an eventuality (1 standard deviation = 68%), which I saw happening in the next 18-months. So far this down move has wiped about $500 million off our balance sheet, about equal to last year's gains, and in the past two days I have made over $75 million in margin calls.

Not very pretty, but at least most of my bank lines are still open for the time being. Goldies is the exception. They are closed to new lending. I can imagine their emerging market and commodity risks are HUGE in any case? To be honest, this was a good shake-out and has made some Russian stocks very attractive, but it would be okay with me if we stopped falling now. I am starting to get nervous! If we have to start making cash margin calls, I can imagine a lot of traders will be up against the wall and then it could get really ugly.

Well, at least it sharpens up the old survival impulses. The blood was getting too thick for a while and forgot what volatility really meant? Everyone is always happy when they are long, the market is going up and they are right.

To put it in context, if you were long gold at $300 an ounce, you're still comfortably in the money, and if you're long above $600, well it was a strategic position in any case, and we're just getting started in a bull commodity cycle that is likely to last 10-15 years right?

Tried to go long crude down below $6700 in the Brent today, but not making new highs. Maybe just some shorts taking profit ahead of today's numbers? Market seems to be coming off now even before NY comes in, as the rally was not broad based and more commodity specific, so not enough to scare any bears in any case!

The backwardation has all but disappeared between the July and August gasoline (HU) contracts in a sign that the complex is no longer as bid, and as the premium for ethanol enhanced RBOB has been somewhat reduced - $2.1625 vs. $2.0550. The gasoline inventory nos. may hold the key this afternoon as the crude either follows other commodities and metals or diverges on its own fundamentals here?

$this->bbcode_second_pass_quote('', 'E')xxon has purchased 80 portable generators for its retail sites in the event of power outages. It is also wiring about 200 gas stations along evacuation routes and near hospitals to accommodate big generators to keep gasoline flowing, and had added 130 backup generators to run fuel terminals and pipeline operations.
But the widespread devastation following Katrina scuttled some industry efforts to restore operations, even when companies were prepared for the task. In several cases, local authorities or the Federal Emergency Management Agency confiscated pumps and generators for emergency medical purposes, delaying the reopening of major pipelines carrying fuel from Gulf Coast refineries to Midwest and Northeast markets.
"One of the biggest problems last year was confusion," said Red Cavaney, president of the American Petroleum Institute, noting that in some cases it was unclear who had control of certain generators.
Companies may be able to do little to prevent the same thing from happening again, according to the National Petrochemical & Refiners Association, which notified its members that Louisiana law grants a parish president authority to commandeer supplies in a disaster.
[url=http://www.marketwatch.com/News/Story/Story.aspx?guid={6158127A-AABF-41D3-976E-25E3C17F28C3}&siteid=mktw&dist=nbi]Higher costs, more backup systems are legacies of Katrina, Rita[/url]

How ridiculous is that? Companies can hardly prepare for disasters if their back-up generators and emergency supplies can be commandeered by a local official? Then they will be blamed for not being prepared and, of course, from profiteering from higher gasoline prices. Rubbish! No matter the market frets about geopolitical and storm related supply interuptions!

Lastly, keep your eyes on today's CPI
$this->bbcode_second_pass_quote('', 'E')conomists polled by MarketWatch are expecting a 0.4% rise in headline inflation and a 0.2% rise in core inflation, which excludes food and energy prices. That would push the year-over-year inflation rate up to 4% from 3.6%, and elevate the year-over-year core rate to 2.4%, above the Fed's so-called comfort zone.
Source: Reuters
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Re: Trader's Corner 2006

Unread postby MrBill » Wed 14 Jun 2006, 10:00:23

$this->bbcode_second_pass_quote('Anthrobus', '')$this->bbcode_second_pass_quote('MrBill', '
')I think they call it a Broad Cross Market Selloff, but in all honesty it was telegraphed well in advance. Remember all those posts about central banks removing liquidity and raising rates?


right. I sold my small package of stocks in a sense of urgency a few weeks ago. The stocks rose still a few points in the coming weeks, then began the actual selloff.

It was really written on the wall. My scenario was a rising oil price, lower dollar, higher interest rates, housing market crash and a selloff at stocks + higher gold, inflation preassure rising constantly in the coming years. I had a quite doomerish vision then.

But now gold is sharply lower, the dollar gaining against the €, no news from the housing market crash, oil price stagnant, interest rates only slightly higher. Everywhere talking of inflation fears instead.

Have i done the right thing from mostly wrong expectations?



The problem may be at least partially

Your timing. If your research was constantly rising inflation in the coming years, then you should not be surprised about higher interest rates which are a central bankers natural response, but also what kicked the legs out of the commodity rally as higher interest rates usually lead to lower growth. And if your time horizon is the coming years, then a 6-week retracement should not spook you out of your strategic postions.

Therefore, your other problem may be managing your expectations adn making sure your assumptions are realistic. It is not consistant to expect higher inflation and lower housing prices generally, as houses like gold are real assets, that are inflation protected in so far as people still have jobs and can meet their mortgage payments. Yes, you can have global inflation and regional housing corrections, but that is getting more specific and then you need to employ more specialized trading strategies.

At least in the short run, interest rates are up more in the USA versus other countries, so that alone is a dollar positive, disregarding the negatives of America's fiscal imbalances in the long run. Therefore, to benefit from that trade, you really need to buy spot and sell forward via a cross currency foreign exchange swap.

If you look at higher interest rates, higher inflation, higher oil prices, weaker dollar, falling stock market, etc. then it helps to do a multiple regression analysis using historical data and see how correlated these markets really are with one another. If you're not doing that type of homework then it is just a shot in the dark based on a few headlines that journalists in their infinite wisdom think are important. They are usually behind the curve. Normally, a market moves, then journalists note that the market has moved, and they try to find out why?

Of course, we all have to rely on public sources of information, but I like to look at the prices and make up my own mind what is happening BEFORE I read anyone else's research to make sure I am getting it before I am influenced by someone else's take on events. I set-up a spreadsheet and check the same markets every morning. I see what is up, by how much and then see what markets are leading and which are likely following. I also collect a lot of data by hand to make sure I am not just looking at charts and headlines without absorbing the information. Others may be able to glance at their screens and take it all in, but I have to write it down before I absorb the information. This is one of my daily routines.

$this->bbcode_second_pass_quote('', 'I') am your constant companion;
I am your greatest helper or your heaviest burden.
I will push you onward or drag you down to failure.
I am at your command.

Half of the tasks that you do you might just as well
Turn over to me and I will do them quickly and correctly.

I am easily managed; you must merely be firm with me.
Show me exactly how you want something done.
After a few lessons, I will do it automatically.

I am the servant of all great people
and the regret of all failures as well.
Those who are great, I have made great.
Those who are failures, I have made failures.

I am not a machine but I will work with all its precision
Plus the intelligence of a person.

Now you may run me for profit or you may run me for ruin.
It makes no difference to me.
Take me, train me, be firm with me and
I will lay the world at your feet.
Be easy with me and I will destroy you.

I am called Habit!
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Trading Psychology

Do not be discouraged. These markets are kicking a lot of butts. Some hedge funds and professional money managers have either taken a defensive stance or have exited the market for the time being as they cannot manage the volatility. This is a sea change in economic environment. Perhaps the biggest since Bill Clinton, the Dot.con bubble and 9/11, so it creative destruction at its finest.

"A trader lives willingly with the vagaries of the market and of life."
$this->bbcode_second_pass_quote('', 'R')oulette is a series of statistically independent events, and outcomes cannot before cast even with a perfect knowledge of the past. In blackjack, the current hand is influenced by proceeding hands, and ananalysis is possible. Clearly, commodity prices are more like blackjack than roulette. The next movement in price is influenced by preceeding moves. Whenever a price changes it has :
a) Moved further from or closer to cost.
b) Moved further from or closer to value basis other alternatives.
c) Changed the willingness of market participants to take risk.

So, if trading is a game, then it is most definitely not like roulette. It bears no resemblance at all to an aggressive individual choosing to take unpredictable, speculative risk. Trading is not even like blackjack, eventhough the risks in both are manageable via careful analysis. This is because an individual will voluntarily chose to take on the risk of a new hand of cards, whereas a company will not chose to take unnecessary risk, but will instead carefully manage risk that it must take to carry on its daily business. Furthermore, one highly numerate individual can successfully analyze the evolving odds in a game of blackjack, but to get to grips with all the complexity of the commodity markets takes a team................

If trading is like a game, it is more like rugby than blackjack, but rugby played by professionals because that is what they do for a living.

Even so there is still one subtle difference. The rules say that players lose games. Cargill has been successfully trading raw materials for more than 140 years, and it’s still fun. Our team of professional traders see risk as an opportunity, not a threat. We play to win!
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