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Brett Owens began studying commodities closely in 2004, and opened a futures trading account with $2,000 in 2005. He promptly bought a sugar contract, and has been fascinated with the commodity bull market ever since. Like many commodity traders, he dreams of pyramiding his gains into great... More
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  • Using the Wall Street Journal to Gauge Investor Sentiment 1 comment
    Sep 26, 2009 06:11 PM | about stocks: UUP, GLD, EEG
    I thought it’d be fun to peruse the Wall Street Journal to see if we could glean some insights into current investor sentiment. Mainstream business publications are famous for (unintentionally) signaling tops and bottoms in markets – but is this really the case, or more of an old wives tale than truth?
     
    I couldn’t think of a better publication to test out than the Wall Street Journal. Those who believe they’re getting an inside scoop by reading the WSJ are amusingly naïve about their “inside source,” which is read by millions of other investors each morning. Even pre-Murdoch, the Journal wasn’t hiding any investment secrets. These days, it has the added bonus of catering to the masses – combined with its wide reach and coverage, what a perfect match!
    So please join me, as I flip through the pages (web pages, of course) in this week’s Journal, in an effort to gain an edge – by taking the other side of the trade!
     
    Further Evidence the Dollar Has Bottomed
     
    From the front page of today’s Online Edition, we see a story entitled:
     
    Small Investors, Big Bets on Currencies.
     
    Oh my. The piece begins:
     
    The dollar is zigzagging, falling below the 90 yen mark Friday and testing the depths it plumbed against the euro a year ago. That kind of action is music to the ears of investors such as Ray Firetag.
    As most of America slept on a recent Monday night, Mr. Firetag was in front of his computer in Elk Grove, Calif., wagering on the Australian dollar.
    For those of you not familiar with Elk Grove, please allow me to fill you in. It’s a (somewhat lower) middle class suburb about 15 minutes south of Sacramento. From 2002 until about 2006, it was regarded as an “up and coming” neighborhood, where many first-time home buyers in the Sacamento flocked to buy homes that were relatively cheap.
    Three years or so after the top of the housing bubble, an astounding number of homes in the town sit empty – either officially foreclosed, or unofficially abandoned – while prices languish 40-50% off their highs.
    You should always “short” Elk Grove – always. When their residents are buying homes, you should be selling. When they are trading the Australian dollar in their pajamas, you should probably be backing up the truck to go short!
    When small investors are on the front page of the Wall Street Journal trading currencies, you’ve gotta think we’re probably in for a massive rally in the buck.
     
    And Gold is Topping Out
    Gold was down this week, settling once again below the $1,000. Thus my search for Gold related stories was initially disappointing, until I came across this great headline:
    India’s ETF Investors Make Up for Missing Gold Buyers
     
    Oh boy – this is going to be good!
    MUMBAI -- Record prices have forced many of India's traditional gold-jewelry buyers out of the market in recent months, but a new source of demand is on the rise -- investors looking for the safety and convenience of exchange-traded funds backed by gold.
    While India continues to be a price-sensitive market, with every rally hitting demand, the rising popularity of ETFs indicates that the Indian market could ...
    I can’t read beyond the “…” because I let my WSJ subscription expire a few weeks ago – but that’s OK, it’s really not necessary.
    It seems like we’re hearing that India, which traditionally bought gold hand over fist this time of year to, surprising, actually use as jewelry. Now they can no longer afford to buy it – at least for its traditional use.
    So they’re speculating on the price instead – and best of all, via ETF’s that take long-only positions!
    This is classic stuff! I’m downright giddy right now – I thought of this WSJ concept for a column on my drive to the coffee shop, with no idea that we’d be able to find such fantastic sources.
    OK well we can’t just end with two. We need one more to close out strong. We had three wishes…thus far, we’ve used two…we know the dollar is set to rally, and gold is in some trouble.
    What’s one more topic we can ask the Swami WSJ to look into its crystal ball and forecast? I got it…
     
    Emerging Markets are Toast
    Alright, I am typing “recession” into the search box…let’s see what comes up…OK here we go! Another nice short candidate:
    “Emerging” Stock Markets Are Looking Better
    The first paragraph says it all:
    On the heels of one of the worst years in stock-market history, some experts say investors should shift more money into a surprising area: emerging markets.
    Good to know that if you do shift more money into emerging markets, you’ll probably be one of the last investors to the party! This article should sweep in the 11th hour bulls just in time for the rally to die.
    On the heels of 50-100% gains in many emerging markets, I can’t see how this could end well for longs. Fortunately we’ve got the WSJ ringing the bell for us here at the top!
    When the global markets turn down again, emerging markets are likely to get slaughtered. What great short candidates!
     
    Three Solid Trade Ideas
    Well kids, here’s what we’ve learned from reading the Journal this week:
    1. Bet on the buck
    2. Short gold – or at least stay away from it
    3. Short the heck out of emerging markets
    We’ll check on these trades in a few months to see how they worked out. In the meantime, can the last dollar bull out the door please turn out the lights! 
    Themes: dollar, currencies, gold, emerging markets Stocks: UUP, GLD, EEG
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This post has 1 comment:

  •  
    You are right on the money, exactly my plan for the current week!
    Sep 26 06:22 PM | Link | Reply
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