Posts Tagged
‘Commodities’
by ilene - March 9th, 2010 4:13 pm
Courtesy of Gus Lubin at Clusterstock/Business Insider
The SEC’s Rick Bookstaber can hardly watch as sheep-like investors chase the gold bubble straight off a cliff.
Although his employer doesn’t give market advice, the SEC’s senior policy adviser shows his personal frustration in a post on Roubini Global Economics. First, he drops this great line about how people don’t even pretend that gold isn’t a bubble:
Even if a guy is just after sex, he at least has the decency to act like there is some substance behind his interest.
Second, Bookstaber thinks hedge funds managers like John Paulson have a pump and dump scheme on gold.
RGE:
Given that “hedge fund” and “highly secretive” are usually said in the same breath, don’t you get suspicious when so many of the top managers are so vocally out there about their gold investments? And when their positions are structured in a way that make them open to view? Paulson and Soros have huge positions in gold ETFs. We know that, because if you buy ETFs, they show up in your 13-F filing. Granted, with an equity investment you can’t help putting that information out into the market, but with an asset there are plenty of ways to take the position without signaling it.
That they are taking a highly visible route to their positions suggests the game that is being played is one of leading the herd. The 13-F reports positions with a big lag, so no one will notice if they quietly slip out the side door while the party is still hopping. And how about when the view is backed up by none other than Goldman Sachs? Will they let everyone know when they think it has gone too far before they get out. Or before they go short? Maybe they already have.
Tags: Bubbles, Commodities, George Soros, Gold, Hedge Funds, Investing, John Paulson, Markets, Nouriel Roubini, public information, Rick Bookstaber
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by Phil - March 9th, 2010 8:26 am
It’s hard to believe that just one year ago today investors thought the world was ending!
Well, not all investors - we were BUYBUYBUYing at the time, as I recapped back in September whan we did our "Market Crash - Year One Review." Click on Cramer’s picture for the Daily Show’s March 4th, 2009 review of the magical moments that led us down to the bottom and here’s another great video from the evening broadcast on March 9th and, of course, there is my own legendary appearance on LiveStock from March 6th, but that’s summarized in the crash link, so save yourself 3 hours, although the first 10 minutes are worth it for people who want to learn about our buy/write strategy as I explained the logic of it as I recommended FAS at $2.41 using those hedges.
And what a wild year it has been as we’ve made an epic recovery. The only question is - have we come too far too fast? Should we be up 75% from our March 9th lows? We are still down 25% from our highs but let’s keep in mind that we made those highs thinking AIG was MAKING money, that FNM and FRE were great stocks for your retirement portfolio, that Kirk Kirkorean was going to rescue GM, that BZH wasn’t some kind of scam, that BSC, LEH et al were "the smartest guys in the room." I urge you to click on Cramer and listen to the idiocy of the analysts who would tell you everything is all right even as it was all falling apart around them - why does everyone suddenly trust them again?
How could we not love this market? Markets do this sort of thing all the time don’t they? It’s all part of the "efficient pricing model" that always lets you know what a stock is truly worth like when GE was "worth" $30 in 2008 and "worth" $6 in 2009 and is now "worth" $16. This is not some biotech folks - this is GE, they’ve been around for 100 years and they have $170Bn in global sales. Did they really drop 80% in value in 2009? No. That’s why it was easy to pick a bottom - the valuations got ridiculous and, as fundamentalists, we siezed on the opportunity to BUYBUYBUY despite the negative sentiment.
Now, we are in a very different situation. Now we have the MSM telling us to BUYBUYBUY…
Tags: AIG, BSC, BULL MARKET, BZH, Commodities, Cramer, DIA, FAS, FNM, FRE, GE, GM, LEH, Oil, SPY
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by Phil - March 5th, 2010 7:07 pm
Ouch!
We did not expect to break higher this week. After a stellar week last week where we had 49 winners in 56 trades, I’m dreading this week’s review as I really feel like my picks were too bearish overall. Of course, the bulk of our trading is in bullish long-term positions that are doing very well but that doesn’t mean I don’t like to win the short game as well. As I said at the close of last week’s review: "I’ll be in a foul mood if we have a commodity rally that moves the Dow up on Monday but it will be my own fault - as I often say to members - CASH is so much more flexible!" And you know what - we did have a commodity rally and I AM in a foul mood!
Commodities are a TAX. They are the worst kind of tax because they flatly (not progressively) charge every man woman and child in this country more money for the same food, fuel, shelter and clothing that they had to have last week in order to live. It doesn’t matter if those people are trying to save or trying to tighten their belts or trying to get out of debt - high commodity prices are a shake-down that rips money out of the pockets of the middle class and funnels it to the very, very small class of commodity producers, commodity speculators and the people who finance them and collect the fees.
Over 99% of the people in this country do not own mines or oil wells (and I’m not counting small farmers because they are literally raped by speculators and bankers, often leaving them worse-off than the consumers) or huge plantations and they do not buy futures contracts on margin with cash they borrow at prime plus 0.5% nor do they own tankers filled with 2M barrels of crude that they arbitrage along the crack spread, looking for an opportune moment to deliver their goods (hopefully during a crisis) at a maximum profit.
So 99% of the people in this country don’t even own a commodity ETF - they have no way to profit from high commodity prices and they need to eat, and they need to buy clothing and have shelter and they need fuel to heat or cool their homes and go from place to place. There is a word for people like that, at…
Tags: Al Gore, BSC, Bush, C, Commodities, GS, JPM, MS, Oil
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by ilene - March 1st, 2010 10:13 pm
Karl argues that the "animal idiocy" we’ve seen over the last year is proof that we’ve learned absolutely nothing. Hard to take the other side of that one. - Ilene
Courtesy of Karl Denninger at The Market Ticker
Yes, I said CRASH, and I meant it.
Why?
"Events" like this:
SINGAPORE/CAIRO, March 1 (Reuters) - Copper is likely to
climb when trading starts on Monday, lifted by uncertainty over
supply after the world’s top copper producer Chile was pounded
by a massive earthquake, analysts said over the weekend.
The front-month contract opened up more than 8%.
This, despite the fact that the earthquake was hundreds of miles away from the mines in Chile and there was zero damage to them. Some were offline for a few hours due to power failures, but none suffered any physical or structural damage, nor did their export points and the transportation network between the two.
So why did price spike more than 8% even though all this was known by the market before it re-opened for trading?
No part of the markets are trading on fundamental values, nor on forward business expectations. They are instead trading as "hot money" repositories where speculators rotate in and out of various instruments literally on a minute-by-minute basis.
This is how crashes happen.
When there is no fundamental value underlying a market there is no floor on price. Price then becomes one thing and one thing only - the number at which you can find another sucker to take your position from you.
This is how tulip bulbs went nuts in Holland, it is how houses went nuts in California in 2005, it is how tech stocks went nuts in 1999 and it is how oil went nuts in 2008.
But now literally everything has gone this way.
Take European national debt. We now know that Italy, for example, was cooking their books as early as 1995. This means that bond buyers overpaid for their bonds and took less coupon than they should have. This should have resulted in an immediate destruction in the value of those bonds when discovered, but it did not.
Why?
Because there was still a bigger fool.
Tech stocks were the same thing in 1999. These "companies" claimed the global GDP some 100 times over between the IPO-issuers in 1998 and 1999. This, of course, is impossible. Yet people kept buying even though mathematically 99% of them had to lose all their money. Ultimately, they did exactly that.
Oil went to $150 in 2008 even though demand was cratering. It…
Tags: bigger fool, Bubbles, Commodities, Economy, fundamental values, hot money, Housing Market, manias, National Debt, speculators, Stock Market
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by Chart School - March 1st, 2010 3:21 pm
Courtesy of InTheMoneyStocks
The S&P 500 closed the week lower by less than 5 points. The broad based index has recovered 60 points from it’s February 5th pivot low. The 1150 level was the January high and is still resistance. The current pattern on the chart can go either way. It is possible that last week was a pause before another push higher. However, it is also possible that it is a short term retrace pattern before another move down. Technically the chart is still strong as the weekly 20 moving average is still significantly above the weekly 50 moving average and this signals that the trend is still up on the weekly chart. Should the SPX decline there is still weekly suppport at the 1050 level.
The SPDR Gold Shares ETF GLD finished the week basically flat this past week. The action was volatile throughout the week as the GLD traded as low as 106.60 and as high as 109.97. It is important to remember that gold is a double edge sword trade. Investors buy gold often as a play against the U.S. Dollar and most fiat currencies. They also buy gold as play aginst overall market fear. Technically the GLD is still in very good shape as the weekly 20 moving average is still above the weekly 50 and 200 moving averages. The one short term bearish case that can be made against the GLD is that it is possibly making lower highs and this must be watched. The dollar should also be monitored closely as gold and the dollar generally trade inverse to each other.
The U.S. Oil Fund ETF(USO) finished the week basically where it began. The USO is now nearing the high range that it has been in since June 2009. Until the the USO breaks out or below the range these levels should serve as good resistance and support. While the USO is trading above it’s weekly 50 moving average it is still not technically very convincing. However, as long as the USO stays above the weekly 50 moving average it can trade higher.
The U.S. Dollar remains one of the most important charts that must be followed and watched. When the dollar declines it gives a lift to most commodity and inflationary stocks. Since the late November rise in the dollar the stock market has paused and pulled…
Tags: Commodities, Dollar, Oil, stocks
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by ilene - March 1st, 2010 2:36 pm
Courtesy of The Pragmatic Capitalist
Of all the big banks no one has nailed the reflation and recovery trade as well as JP Morgan. Of course, as we noted last week, they are one of several large banks that have been driving equity prices over the last year so ignore them at your own peril.
JP Morgan is shifting back to a fully bullish posture here. Three weeks ago they shifted to a more cautious position (see here), but have removed the hedges as equity fund flows begin to support the market and fears of fiscal tightening, regulation, and sovereign debt appear overblown.
Based on this change in outlook they are moving back into the recovery trade. They are now net long equities, credit, commodities with a long dollar hedge and a short bond position:
- Fixed income: Take profit on the short position in US 2s, but add a short in 10-year UK.
- Equities: Current regulatory proposals would hurt bank profitability, offsetting the positive impact from reduced credit losses. UK banks will be the most impacted, followed by the Europeans and then the US banks.
- Credit: Close tactical short and resume overweight in US HG bonds.
- FX: We add USD/EUR to our basket of dollar longs.
- Commodities: Stay long on strong manufacturing growth.
Source: JP Morgan
Tags: Banks, Commodities, credit, Equities, JPMorgan
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by ilene - February 5th, 2010 11:29 am
Courtesy of Mish
Last week the LA Times reported the California teachers pension fund is $43 billion short.
Another pension alarm bell is ringing in Sacramento, this time at the teachers retirement system, where the nation’s second-largest public pension fund is reporting a $43-billion shortfall.
The California State Teachers’ Retirement System said that as of June 30, 2009, it could meet only an estimated 77% of its future pension obligations — far less than the 100% recommended by actuaries.
Known as CalSTRS, the fund took a big hit during the 2008-09 fiscal year, losing a quarter of its value. Since then, its investment returns have improved, but the growth isn’t strong enough to keep up with a widening funding gap.
What’s worse, CalSTRS Chief Executive Jack Ehnes said in a report to be presented to the board Feb. 5, the fund could be broke in 35 years — the length of a typical teaching career.
To avoid that calamity, Ehnes wants the state Legislature to raise employer pension contributions paid by the state and, indirectly, California’s 1,043 school districts in the next few years.
Rolling The Dice With Commodities
Given there is virtually no chance the legislature will pony up $43 billion, CalSTRS considers rolling the dice on commodities. Hell why not? Taxpayers are on the hook if it does not work out.
Please consider California Teachers’ Pension Fund Mulls Commodity Investment.
The California State Teachers’ Retirement System, the second-biggest U.S. public pension, is considering investments in commodities to boost returns and provide a hedge against inflation and slumping equities.
The governing board of the fund, with $134 billion under management, is scheduled to hear today a staff report in Sacramento that recommends its first-ever commodity investment. The board will decide whether to seek additional research on strategies and portfolio weightings.
“Commodities historically exhibited low correlation to equities and bonds and produced double-digit returns when equities fell,” Innovation and Risk Director Steven Tong and Investment Officer Carrie Lo said in a report to the board. “In effect, commodities may act as an insurance policy, realizing low single-digit returns over the long run but generating large double-digit payoffs in the event of a negative shock.”
Commodity prices have surged since 2001 as global economic growth led by China, the fastest-growing consumer of raw materials, spurred demand for metals, energy and grains. Copper prices have quadrupled in the past eight years, and crude oil has more than doubled.…
Tags: Calstrs, Commodities, Housing Construction, Light Crude, peak oil, Reflation Trade
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by ilene - February 2nd, 2010 1:13 pm
Courtesy of Vincent Fernando at Clusterstock/Business Insider
Anyone who thinks that the business of derivatives ended with the financial crisis had better check out the recent trading volumes released by the derivatives exchange company CME Group.
Just this January, total derivatives trading volume shot up 19% year over year, with particularly feverish activity in interest rate derivatives (for fixed income, Up 33%), foreign exchange derivatives (Up 78%), and metals derivatives (Up 65%).
Traders are loving derivatives like never before:
Also, keep in mind that CME Group just began clearing infamous credit default swaps (CDS), which comprise an enormous market for further trading growth. The sky’s the limit, until it comes crashing down again.
See the CME Group release here >
Tags: Commodities, Credit Default Swaps, derivatives, Financial Services, Markets, Money, Wall Street
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by ilene - January 28th, 2010 12:52 pm
Courtesy of Vincent Fernando at Clusterstock/Business Insider
George Soros didn’t mince his words when giving his opinion on the yellow metal in Davos to Maria Bartiromo:
Telegraph: Mr Soros, arguably the most famous hedge fund manager in history, warned that with interest rates low around the world, policymakers were risking generating new bubbles which could cause crashes in the future. In comments delivered on the fringe of the World Economic Forum, Mr Soros said: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold." (See the video interview here)
If ultra low rates are inflating gold, then what will happen as we enter a tightening cycle and interest rates rise?
See Also:
Gold Is On A Four-Day Losing Streak
Barrick Gold: Here’s Why We Eliminated Our Gold Hedges, Just As The Marked Started To Peak
John Paulson Hoarding More Gold Than Several Countries Combined
Tags: Commodities, Economy, George Soros, Gold, Hedge Funds, Interest Rates, Markets
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by ilene - January 28th, 2010 12:47 pm
Courtesy of Vincent Fernando at Clusterstock/Business Insider
While drilling techniques for natural gas from American shale formations continue to appear safe overall, many are questioning the reliability and objectivity of current environmental assessments.
Statements such as the following only cause confusion and distrust:
Dallas News: Nearly one-fourth of the sites monitored in North Texas’ Barnett Shale natural-gas region had levels of cancer-causing benzene in the air that could raise health concerns, state regulators said Wednesday.
They emphasized, however, that gas companies have fixed the worst emission problems and are working on less-serious sites where the state still wants benzene levels to come down.
"We don’t have a widespread air-quality issue, at least according to the data," said John Sadlier, the Texas Commission on Environmental Quality’s deputy director for compliance and enforcement.
Mayor Calvin Tillman of the tiny Denton County town of Dish criticized the study for not including enough tests in residential areas or enough long-term sampling. The town commissioned its own monitoring last year that found extremely high benzene levels.
"I don’t think they want to find anything in a populated area, and I think their sampling reflects that," Tillman said.
The shale gas drilling (and frakking) safety tests of today will have huge ramifications for tomorrow, given that current drilling only scratches the surface of the U.S.’s potential shale-derived natural gas reserves.
Still, given the major commitments in American shale gas made by Exxon (via its recent XTO acquisition) and France’s Total (via its Chesapeake tie-up), it seems highly likely that shale’s environmental concerns will eventually be managed. In the end there’s likely a way to extract the gas safely without too much added cost, if it already isn’t safe enough. Note Total just closed its $2.25 billion Chesapeake joint-venture deal. Regardless, Chesapeake shares are falling.
The author owns shares in Chesapeake Energy (CHK).
Tags: cancer, Chesapeake, CHK, Commodities, Energy, Gas, Markets, shale gas
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(