ICouldBeWrong

A Glut of Petroleum Products

dieuwer: No I didn't know that. What makes you say that? Any links?

Wednesday Outlook: Commodities, Emerging Markets

Great article.

I plead guilty by the way. Went short S&P500 at 1259 got squeezed out at 1271. Sold all my Yen, have to totally regroup and rethink.

It was an exciting day, great battle.

Notes on a Schizophrenic Market Week

jimmy46: Nice comment, make sense. I will do some research to verify your claims.
Ames: Please keep posting, I'm following your comments.

Personally the last 6 weeks have been very good to me. Going short the S&P500 at 1400 and then covering at 1210-1220. (See my previous comments). The equity markets recent action seems quite logical to me and not schizophrenic at all.

I did lose a little on my commodities trades, and broke even on my currency trades, but big gains in my equity shorts have resulted in another 0 being added to my day trading account.

Maybe, maybe, crude will rally back up to $136ish, I'm not sure. But over the coming months I expect commodities, the S&P500 and global equity markets in general to sell off in tandem. Which is actually what I was expecting several months ago, seems I was a little early on commodities.

Long Yen. Short Equities.

Are Commodities Reversing or Consolidating?

Sorry but the CRB chart given in the article going back to 2004 looks like nonsense to me. The formula used to compute the CRB changed in July 2005. See here www.zealllc.com/2008/c.... I would recommend using the CCI for long term charts instead.

This is similar to the VIX/VXO issue I mentioned in my last post. This is basic stuff guys, don't you care about the money you manage? Please at least know how your indexes are computed!

dieuwer: I agree with you that Dow/Gold ratio is likely to return to 1. But the way I compute it the CRB:SPX ratio is at a two week low not a 10 year low, maybe you need to check your chart. (And as I just said for charts more than 3 years old you should use the CCI not the CRB).

Personally I'm very bearish on equities, and have turned bearish/neutral on commodities in the medium (2 year) term. I own some commodities for the long term but are expecting to lose money on them in the next 2 years.

I believe we are beginning to see substantial demand destruction in energy. Global stock markets have been going down now for about 12 months, that should be long enough to start to flow through into reduced demand for commodities.

Long Yen. Short Equities.

Volatility and Sentiment: Today Doesn't Matter

Looks like crude has suffered a failed breakout, short term trend in crude is now downwards. Unsure whether 50-60dma will provide support. But I have doubts it, suspect 150 is going to be tough to crack, could go down to 79-105 now. Decided to close my short term commodities position as well. Even got out of a little of my precious Yen, but will buy more Yen later, and short S&P again, probably next week.

Small loss in commodities (due solely to crude). Breaking even on Yen. Big profits shorting S&P500. Time for a short break.

Volatility and Sentiment: Today Doesn't Matter

I was buying heavily today ... covering my shorts. I expect a bounce back up to 1230-1300 (when I will start shorting again), before the S&P500 falls to well under 1200. (Then another bigger bounce back to the same levels 1230-1300).

I also find the vixandmore website interesting and only found it by accident myself a few days ago. Another thing I found interesting (alarming really) is that the methodology used to compute the VIX itself has changed, so it's no longer the VIX its something different now. The old (REAL!!!) vix has now been renamed to VXO on stockcharts.com.

Good article about that here:
zealllc.com/2008/vxosp...

Why Are Oil Prices So High? Gold Solves the Riddle

Good article. Good comments.

Who's to Blame for IndyMac's Failure?

Soros seems ok to me, although I don't agree with his politics, and I wish he would lighten up a bit and throw a few more jokes in his books.

He definitely didn't break the Bank Of England in '92 or cause the Asian currency crisis. Those things were going to happen with or without him, he just profited from the trend. If you are going to blame him for that you might as well hate anyway who has invested in a market or has funds in a pension plan.

He also appears to have done a lot of good for the world. e.g. Donating money for photocopiers in the former Soviet Union to help people spread information and communicate. He also has funded many artistic and scientific organizations, in the former Soviet Union, South Africa, and even Burma I believe. I find it hard to see that as a bad thing.

He does strictly separate business and philanthropy. He invested heavily in Russia during the beginning of the collapse in an attempt to stabilize the region and help it rebuild, that turned out badly and he lost money. So now he strictly separates business and charity, I can't say I blame him for it.

The reason he doesn't like Bush is because he thinks bush is leading the US towards fascism. He wants to make sure free speech and the rule of law is protected in the USA.

Personally I wish he would have funded Ron Paul rather than the Democrats, but as I said I don't agree with his politics.

Finally let me end with something slightly critical about Soros. The Quantum fund (best performing hedge fund over a 30year period IIRC) was founded by Soros and Jim Rogers. Soros is no dummy and he was very generous in describing how the global financial system works and how to run a hedge fund in his books. (Thanks George!). But Rogers left to do his own thing, and given the superior returns made by Rogers compared to Soros over the last 10 years I have to consider Rogers the better investor.

How Low Can This Market Go? The 40 Percent Solution

It will be interesting to see if commodities and commodity stocks collapse here.

On the one hand crude has clearly gone parabolic. On the other hand other commodities like Frozen Concentrated Orange Juice is trading at a similar price to 1980 in nominal terms, that is without adjusting for inflation.

I guess I will hold for now, or maybe accumulate a little more precious metals and OJ.

The After Hours Oil Scam

StevenK exactly! If Mr Davis has detected a pattern in the market (manipulation of not) then why not profit from it?

Honestly sometimes I'm tempted to sell at noon Chinese time and buy at noon New York time myself.

Commodities Are Taken to the Woodshed - What's the Game Plan?

You might like to consider investing directly in commodities (via futures) rather than commodity stocks.

Long commodities. Short equities. Long Yen.

Going New-School About Indexing

I also have been enjoying this column and could become a regular reader.

In the long run (40 years). I'm an optimist on the economy. I agree with Warren Buffet that index funds make sense for most people. I think we will solve our energy problems (via Farnsworth/Bussard fusion reactors, sorry to use the f word), and the USA could even led colonization of the galaxy this century.

In the more immediate future (2-5 years) I'm very pessimistic. Both the credit crisis and energy crisis are real problems that aren't going to dissapear overnight. So I'm mainly in cash (AUD as that's were I happen to reside. I actually expect the AUD to fall in the short term, but at least interest rates are 7%ish, which is ok, and going up. And Japanese Yen JPY, for a carry trade play, as Jim Rogers says 'everyone should own some yen').

Being in cash I need an inflation hedge. So I'm also buying some commodities, even oil. Yeah oil is going to crash I agree, the question is will it go to 150ish and crash back down to 100ish, or will it go to 200ish and crash back down to 130ish. I'm beginning to think we are going to 200. (So really correct rather than crash)

I'm also still short the S&P500 and selected stocks. That's about it.

Please allow me to give a few links regarding the Farnsworth/Bussard fusion reactor. If you are feeling down about energy prices this stuff could really cheer you up.
video.google.com/video...
en.wikipedia.org/wiki/...
en.wikipedia.org/wiki/...
en.wikipedia.org/wiki/...
en.wikipedia.org/wiki/...

Sometimes a Bear Is Just a Bear

CLH: I expect we will see a new S&P500 low (below 1250) soon, probably within 2 weeks. We've just seen a new 52 week low in the Dow Jones Industrial Avergage (admittedly the transports are holding up better). I don't know if you follow the VIX, but the way I read it, it's not showing much fear currently. More like complacency.

What if oil has broken out of the trading range between 130-140 a barrel and is heading higher? What if it hits $150 a barrel this week, then I think we will see fear.

Sometimes a Bear Is Just a Bear

secmaven: Sorry my 'surely it can't continue being this easy to make money?' was misleading. I had a good week last week. Personally even with the similarity to the 2000-2003 bear, I still don't find it easy to consistently make money in the markets month after month, it's hard work and somewhat hit and miss in my experience. Maybe I should have taken a profit at the market close on Friday.

Having said that if the market rallies to 1290-1310 on Monday morning New York time I will consider that a reasonably good opportunity to short more. If such a rally occurs on Monday, and we continue to repeat the 2000-2003 bear then we should hit 1150 before we hit 1400, (in fact we shouldn't see 1400 again for several years).

But that's assuming we continue to rhyme with the 2000-2003 bear. A better risk/reward opportunity is to wait until the S&P500 rallies to say within 5% of the 200dma (with a stop set say 12% above the 200dma). The 200dma should provide strong resistance, but this setup could take several months to occur (about 3 months if we rhyme with the last bear, and at about where we are now ~1300) and hence will require more patience.

Another note, I would like to hedge every short position with a long position. (e.g. to hedge against hyper-inflation) so I might go long some more commodities.

VIX Is Complacent, Despite New 2008 Dow Low

I also read the VIX as indicating complacency.

I guess most equity market participants (S&P500 at least) are expecting the market to find a floor near the 52 week lows. If that doesn't happen, and the S&P500 breaks down to new lows (as I expect), then risk aversion could spike, quickly sending world equity markets much lower, fast.

I would be very cautious about using oscillators currently. In a trending market oscillators will give exactly the wrong signal as a breakdown/breakout occurs. This is not a good time to depend on short term reversion to the mean!