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Expat finance professional living and working in Hong Kong.
  • My July-14 Strategy Review

    OK, it is time to review my forecasts for June and July.

    Soybeans - my plan to short beans brought me good profits. Closed position on 1 of August as options I sold earlier lost most the value and keeping position open was meaningless and I bought them back. I still have bear spirit inside me but I want to see WASDE, it is only a few days away.

    Soy oil - prices declined as expected.

    Cotton - same story as above.

    Cocoa - here I am kind of busted for now. Instead of expected decline cocoa added another USD100 to USD3,200. I keep my shorts open and I believe market lost touch with the reality. In brief - we can see news about rising US and Asia grinding numbers but EU grinding numbers declined much stronger and if you add up all grinding numbers for EU, US, and Asia you will see that there is a quarter-on-quarter decline in grind numbers. So demand is not that "out of control" as some like to say. Also, weather news and crop reports from Africa point at good crop numbers and good prospects.

    Coffee - I made good money shorting coffee but last days of July brought me some headache with unexpected price jumps. I still believe that coffee prices should not exceed USD2.00 in a medium term and I do not think market is right when they go wrecklessly bullish simply because some analyst and an export company issued bullish estimates in generally neutral-bearish environment.

    Natural gas - prices dropped as expected. Summer is bad time for bulls, especially mild summer.

    Heating Oil - I opened bullish position in November contract a couple of cents ago. Maybe I was wrong, time will tell.

    Gasoline - still shorting it.

    Aug 05 1:39 AM | Link | Comment!
  • El Nino Further Impact

    A few weeks ago I wrote on how commodities react on El Nino during early stages - summer. Now I want to cover next stage - next 4 months up to the end of December. As before only 4 years - 1982, 1986, 1997, and 2009 will be reviewed and the precautions against results need to be the same - remember, this is a small selection for statistical purposes, expiration bias is possible, past performance is not indicative blahblah and so on...

    OK, results:

    Grains - wheat and corn declined and rose equal number of times. Soybean group (beans, meal, oil) rose 3 time vs 1 decline. I'd say this is rather neutral result. However, assuming this year's drastic drop of beans I do not rule out that the score will be 4vs1 in near future.

    Softs - cotton and cocoa made 3 declines vs 1 growth, coffee was even, orange juice was 3 times green and 1 time red.

    Petroleum group and natgas were even. Metals too.

    Conclusion - there is no clear impact no matter what crowd thinks. One more proof to abandon herd mentality and use own brain.

    Jul 15 4:42 AM | Link | Comment!
  • A Brief Addon To July-14 Strategy

    A brief update. I closed my short position in Cocoa before grind reports. The major one - EU grind report was released last week showed 10% drop in grind numbers. This number can be corrected later but this is alot for a year of "looming global deficit". So demand is no longer that hungry beast. Plus preliminary news are good about coming main crop and no bad news about midcrop. I re-opened short position for next 2-3 months. If you are more risk averse then wait for another couple of weeks - US and Asia reports will be out soon. But remember - EU's is the major one.

    Jul 14 2:51 AM | Link | Comment!
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