Aly-Khan Satchu

Seismic Geopolitical Events Have Little Effect on Markets

Dear Matt,

A very interesting piece. May I challenge a couple of your conclusions.

The blow off top to $147.00 was substantially driven by fears that the US or Israel was readying an attack on Iran. Quite properly, the consequences of such an attack were impossible to model. Iran is not Iraq. It is a materially different proposition. Once the President ruled this out the market slipped into free fall.

Re: Gaza

The Gaza strip is best characterised as a prison. Therefore, besides lobbing a few totally ineffective rockets, there is no risk of reaction or contagion. Therefore, Gold and Oil were unable to rally. It hardly compares with the toppling of the Shah [for example] when Gold surged last time around.

Re: India and Mumbai

The Sensex is one side of the coin. Have you had a peek at the Karachi stock Exchange? Thats certainly reacted. The Sensex had already tumbled from over 20,000 to below 10,000. The attack whilst alarming was not material.

Re: Russia and Georgia.

Putin certainly served notice of a sort but within a few weeks, the Economy cratered world wide. Had that episode occurred in the early months of the year the reaction would have been entirely differently.

I wish you a wonderful new Year.

Aly-Khan Satchu
rich.co.ke

I have written a commentary all year here
www.rich.co.ke/rctools...

Please use the calendar to see comments and when.

How OPEC Can Support Oil Prices - UBS

It is far easier to play at the Three Musketeers [One for all and all for one] in a bullish market. Conditions are bearish and there is a gulf between the rhetoric and the reality. The marginal overdemand meant in the go go expansion phase, the ultimate Price setter was that 3% who need to cover. With demand cratering [see Baltic Dry Index and has been an excellent lead indicator], supply is overwhelming and enforcement discipline 0 or very near there. We are headed to $32.50 and then below.

Aly-Khan Satchu
rich.co.ke

Gustav and the Oil Volatility Index

IEA have tried to cap the price but its effect has been fleeting and confirms that Oil has based out now. Putin has the oil market by the proverbial cohones and I refer you to the following;\

Russia may cut off oil flow to the West
www.telegraph.co.uk/mo...

It seems sensible to be long now.

regards
Aly-Khan Satchu
rich.co.ke

Contrarian Trading Tips: Gold, the Dollar, Energy and Financials

Nearly every commentary I have read today is suggesting the same strategy so perhaps the real contrarian would buy the $ and sell Gold and Energy.
Aly-Khan Satchu
rich.co.ke

Is It Time to Bet Against Oil?

Oil is the most accurate barometer of Geopolitical risk, especially in the Middle East. Sabre rattling by the Israelis first and now the Iranians will keep the market on the boil until Bush and Cheney exit the White House. I would err on the side of buying PUTS [1 year expiry] on a 'black swan' event that drives us upto the $170.00 area, if that happens.

Aly-Khan Satchu
rich.co.ke

Oil ETFs: What if the Dollar Strengthens?

It is highly unusual for The Fed to comment on the $ and I think it reflects a degree of concern that $ shorters need to take notice of.
Paul Volcker also recently broke with form to say that there was a $ crisis. So I feel that the $ can rally substantially from here. In that context, it would be a little foolhardy to stand in front of what might very well become a freight train in the Crude markets.

This is not the time to be limit long Crude.

Aly-Khan Satchu
rich.co.ke

Weekly Market Commentary: May 19th - May 23rd

Matthew,

Very enlightening. I have a strong conviction about the softs and was keen to make a leveraged investment via Options. From your piece, its clear that you trade them. Is there a liquid market for options two years out in the softs? Is this the way you would reccommend the play, out of the money calls or are there other structures you can reccommend?

Aly-Khan Satchu
rich.co.ke

Is Anyone Benefiting From Global Inflation?

Sir,

You say; Although the general price level is rising, the truth is that relative prices have experienced an imbalance, with commodities outpacing the rise of other sectors.

Surely, this entirely depends on your starting point. If you care to look on a longer term basis, many Commodities sufferred from a long period of price underperformance. This started to correct in 2002-2003 with the Oil and Metals complex. The Softs have only recently started to perform and I agree we have passed the tipping point in this regard. We are at the start of something and not even anywhere near the middle.

Clearly, the Beneficiaries are those who are long of resources. The Natural longs faced a one sided demand structure [The West] and the rapid arrival of China and India brought competition to that demand equation. It seems to me to be as basic as that.

Hence one could argue that Consumers [and the biggest Consumers are in the West] have paid an Alice in Wonderland price for their consumption. We are now reverting to a fairer price structure.

Our 'Goldilocks' economic assumptions were just that. They were too US and Euro centric.

The free ride is over. Investors have already taken note.

Aly-Khan Satchu
rich.co.ke