Eric Peterson

Eric Peterson
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  • Get Ready To Buy Natural Gas  [View article]
    Regarding UGAZ, the 3x leveraged fund:

    Watch out for "leverage decay", which means if you buy a leveraged fund, hold it for a period of more than a few days, and sell it when the underlying (natural gas) is at the same price as your entry, you are guaranteed to lose money. In my opinion, any article mentioning a leveraged fund, especially 3x, need to mention leverage decay, or its being negligent.

    These 3x funds are meant to be held for only a few days because of this.

    if you want leverage, better to buy a futures contract. There's no leverage decay: If you enter and exit with natural gas at the same prices, you lose nothing. Not so with UGAZ!
    Dec 1, 2012. 06:30 AM | 1 Like Like |Link to Comment
  • Is The Yen Doomed?  [View article]
    Commitment of Traders and Public Opinion show the most extreme negative sentiment towards the Yen in years (small traders are shortest in years, large commercials are long). So I find it hard to see the Yen decline a lot from here and prove all the small traders correct, at least in the short term of the next few months.
    Dec 1, 2012. 06:22 AM | Likes Like |Link to Comment
  • Modern Portfolio Theory 2.0 - The Most Diversified Portfolio  [View article]
    tbates757: The past 10 years have had a wide range of events. Stocks had a major rally 2002-2007 and then a horrendous correction of more than 50%. It's hard to imagine something in the next 10 years that is more drastic.

    Real estate also had a nice period and then a horrendous drop. Again, hard to imagine the future holds anything more dramatic.

    The only problem with the last 10 years might be the large number of bond funds in the mix (4 out of 9 funds used in this portfolio), because interest rates have been steadily dropping. That could change, and rising rates haven't been included in this backtest.

    Also gold has been in a major rally the past 10 years, so of course any portfolio that includes gold has done better than a portfolio that doesn't include it. It's possible gold won't keep rallying, and its inclusion will hurt portfolio performance.

    But the main answer to your question is nobody can predict the future and it's not possible to forward-test, only back-test!
    Dec 1, 2012. 06:09 AM | 2 Likes Like |Link to Comment
  • Modern Portfolio Theory 2.0 - The Most Diversified Portfolio  [View article]
    4 out of the 9 asset choices are bonds. That seems to be overkill. The only "commodity" choice is gold. How about getting rid of one of the bond funds and adding a general commodity fund such as DBC or an agricultural fund such as RJA? Or an energy ETF. Maybe those haven't been around long enough to do the backtest, but you really need a wider range of assets that includes some consumable commodities, not just gold.

    Also how about one or two currency funds? For example, Japanese yen (FXY) performed very well during the market drops in 2008, 2010, and 2011, showing a negative correlation to stocks and giving nice gains.
    Dec 1, 2012. 05:56 AM | Likes Like |Link to Comment
  • Commodity Chart Of The Day: Gold  [View article]
    Ah, maybe it wasn't the same guy. But I've seen those two middle paragraphs many times in the past days, word for word. Maybe it's a campaign to discredit GLD and get people to invest in some other gold ETFs, possibly by the managers of those other ETFs.

    If Soros puts hundreds of millions of dollars into GLD, I think he knows what he's doing (regarding ETF safety, not necessarily the future direction of gold). He could buy physical gold if he thought the ETF wasn't safe.
    Dec 1, 2012. 05:22 AM | Likes Like |Link to Comment
  • Commodity Chart Of The Day: Gold  [View article]
    Conservative_Views, you've posted the same comment several times over the past week, in other articles.
    Nov 30, 2012. 04:49 PM | Likes Like |Link to Comment
  • Will Natural Gas Change Direction And Fall?  [View article]
    "It is literally range bound between $3.50-$5.00 leaving very little room to make money on it for the next 1-2 years".

    That's assuming your only play is to go long. If you believe it's range bound, you can sell out-of-the-money puts and calls, collecting nice premium as long as it stays in the range.
    Nov 30, 2012. 04:27 AM | 1 Like Like |Link to Comment
  • TVIX: Don't Be Left Holding The Zero  [View article]
    untrusting: it is of course a horrible "investment" decision to buy TVIX and hold it for longer than a couple days. But it's not a fraudulent product. It does exactly what it says it will do. It breaks no laws.

    It is no more fraudulent than VIX futures, which lose money if you hold them for any period of time. No more fraudulent than out-of-the money puts on the SP500: You have to be right about a crash, and be right soon, or you lose ALL of your money.

    Fines and penalties for the people who run TVIX is ridiculous, of course. If anyone is penalized, it's the exchange that approved TVIX trading.

    Probably the only change that is needed, is that in order to trade TVIX you should be forced to sign an options agreement that enables your brokerage account for options trading. TVIX is like an option, and that should be made clear to people.
    Nov 30, 2012. 04:09 AM | Likes Like |Link to Comment
  • Are Stocks And Bonds Dead?  [View article]
    Lowell, exactly! I like to say "There will be a 30% drop in the SP500". And I'm always right. Because I didn't say when!
    Nov 29, 2012. 05:35 PM | Likes Like |Link to Comment
  • Why The Next Few Years Will Be Incredible For Commodity Investors  [View article]
    Kevin, huge amounts of cash earning almost no interest often flows eventually into stocks, not commodities. People who park their money in savings accounts (as opposed to money markets, bonds, brokerage accounts, or futures accounts) are not sophisticated enough to buy commodities.
    Nov 29, 2012. 01:40 PM | Likes Like |Link to Comment
  • Are Stocks And Bonds Dead?  [View article]
    Didn't Bill Gross call a top in the bond market a couple years ago, and get burned by the huge rally in bonds?

    There might still be a huge crash in bonds, but how much pain can you endure being short while they have a major rally?
    Nov 29, 2012. 01:34 PM | 1 Like Like |Link to Comment
  • Gold Prices Experience A 'V' Shaped Bounce  [View article]
    Did this flash crash trash anyone's stash? I doubt it.
    Nov 29, 2012. 01:29 PM | 1 Like Like |Link to Comment
  • Gold Prices Experience A 'V' Shaped Bounce  [View article]
    I don't see this big drop on my futures chart for December Gold. Nothing below 1745 on Monday, and the futures trade for 23 hours and 15 minutes every day. Seems like some fluke in the spot market chart, not a real drop in prices.

    Even looking at your chart, it says "Last Price 1749.40" which doesn't match the last point on the green line. Data bust from your quote vendor.
    Nov 29, 2012. 12:24 PM | 2 Likes Like |Link to Comment
  • Sheep To The Slaughter: Beware The Great Bond Bubble  [View article]
    Colin, you wrote: "Not actionable because I didn't specify exactly when the collapse will come? It is actionable: short Teasury bonds and short investment grade corporate..then wait."

    Sorry Colin, that's not actionable or guaranteed to make a profit. It's similar to this:

    "I predict there will be a 30% decline in the SP500".

    I am guaranteed to be right when I make that statement. Nobody can say I am wrong and I won't be wrong. But I didn't say when the decline will occur! That's the key! If I go short the SP500 right now, I may or may not make money when a 30% decline finally occurs. Depends how much the market goes up before the decline occurs.

    Same with bonds.

    What's the famous quote? The market can remain irrational for longer than you can remain solvent.
    Nov 29, 2012. 11:22 AM | Likes Like |Link to Comment
  • Sheep To The Slaughter: Beware The Great Bond Bubble  [View article]
    gggl, buying a bond fund and buying an individual bond will give you the same total return if you hold both until the individual bond matures. Minus the fund expenses, of course. This has been explained and proven in a number of Seeking Alpha articles.

    To summarize those articles:

    It's a common misconception that holding an individual bond instead of a bond fund will be much better when interest rates rise. When rates rise, your invidiual bond will not pay you more each year. Its yield will stay the same. But the yield on the bond fund will rise while its asset value falls. Those two factors will magically cancel out and the total return will be equal to your individual bond. This is basic math.
    Nov 29, 2012. 11:14 AM | 1 Like Like |Link to Comment