Hoarding is exactly what the government is doing right now by filling the SPR, and frankly it's the best thing that could happen. It drives prices up. High prices encourage demand destruction. They also finance new well development. The hoarded oil gives us a buffer to fall back on once shortages become more prevalent. High prices are what we need in order to adapt to what's coming, and the sooner they happen, the better.
Posted: Fri Dec 28, 2007 5:19 am Post subject: Trader's Corner 2008
A place where people may talk about energy & commodity markets and what is driving them. Especially in terms of how today's markets may foreshadow or give us hints as to what will happen post peak oil.
Just letting the old thread die and starting a new one here. Welcome to 2008!
Caveat Emptor/ex-ante/post-ante/Code of Conduct/etc./
Quote:
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I am back in mid-January. Thanks. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Last edited by MrBill on Thu Apr 03, 2008 2:57 am; edited 2 times in total
Posted: Sun Dec 30, 2007 3:00 am Post subject: Re: Trader's Corner 2008
1st reply!
2007 is pretty much over and it was a good year for me. The best I had actually. However I'm still not making enough money to afford the "Jesse Livermore" lifestyle of a 10,000 sq ft mansion with the football field length yacht anchored in the back.
Getting serious now I do not claim to be an expert (so be warned) but one of the "advices" I would give as a trader is set aside a % of your winnings in a "reserve capital" account. What is RC (reserve capital)? It is money you lock away in cold storage just in case if disaster strikes and you lose most of your precious money in the market. That way you have a safety mattress to fall on. Of course that means you have less money to play with but it's better to be safe than to makes lots of $$$.
Supposedly Jesse Livermore's greatest financial regret was not pulling more money out of the market and putting it in safe storage. Is this true?....Who knows for sure but at least it makes for good story telling.
Joined: Oct 23, 2004 Posts: 5167 Location: New Jersey
Posted: Sun Dec 30, 2007 5:14 pm Post subject: Re: Trader's Corner 2008
Most likely it's precious metals, particulary silver, although with any blowup in the mideast (including Pakistan, Iran) it's likely oil will be a better bet.
In general, the price of energy and other natural resources will keep climbing - even as world economies slow their growth. Chindia may not slow in the first half of 2008, but will later in the year.
The price of agricultural commodities will more or less follow energy up - with more spectacular price gains starting in 2009 as it becomes apparent the last of the world grain's reserves are disappearing.
I completely missed the move in emerging markets in 2007. It's too late to jump in there now - China, India, and other Asian countries are going to run smack into the wall of many depleting natural resources and possibly environmental disasters that will hold back growth. This may take a few months or so before it becomes a big problem.
I'm willing to possibly look foolish here and say $1000 gold by March 31 and $20 silver by June 1. _________________ It's already over, now it's just a matter of adjusting.
Posted: Sun Dec 30, 2007 7:05 pm Post subject: Re: Trader's Corner 2008
cube wrote:
2007 is pretty much over and it was a good year for me. The best I had actually. However I'm still not making enough money to afford the "Jesse Livermore" lifestyle of a 10,000 sq ft mansion with the football field length yacht anchored in the back.
Mine sucked, worst ever so far!!
I lost no money at all, which is a really good thing.
I also made no money at all which explains the exasperation above. :-0
It was a year of fear for me (sat out the 1st quarter) and when I got back in it was at a high point for most of my buys.
All the stuff Bill and co are worring about now, I was worrying about then.
I felt paralysed and lost, and still do to a degree.
The wife bought me a couple timeless tomes from the early 1900's on stock market psych. to salve my ego so I am ok.
Just for the record, I've only been doing this a little over three years now on my own, and 5 years total if you include TD's financial 'advice' from one of their 'expert' financial 'advisors', so my average return of over 20 percent per annum has been quite OK.
I have nothing to bitch about really, just being greedy.
I smell recession this year, what more can I say?
My big question for the forum is this; how can I make money in a down market?
Joined: Oct 23, 2004 Posts: 5167 Location: New Jersey
Posted: Sun Dec 30, 2007 8:34 pm Post subject: Re: Trader's Corner 2008
drew wrote:
My big question for the forum is this; how can I make money in a down market?
Drew
This is not a recomendation, but of you were expecting a market decline lasting three months or more, the best way to invest is through a "bear" nutual fund. The one I would use is -
RYDEX SERIES FUNDS: INVERSE S&P 500 STRATEGY FUND; INVESTOR CLASS SHARES, symbol RYURX.
A mutual fund is better than a short index fund (ETF) for reasons that would take me too long to explain. Basically your money is working harder and subject to less fees with a mutual fund. For short term trading, the short S & P fund - SH - is easy to trade. There is also a series of funds that double the market move - for the S & P that would be SDS.
As a note of caution, it probably would not be wise to put all or most of one's money into any investment or strategy unless you were a professional. _________________ It's already over, now it's just a matter of adjusting.
Posted: Sun Dec 30, 2007 9:44 pm Post subject: Re: Trader's Corner 2008
Thanks Dante!
Also for the caveats about not having all the eggs in one basket. (I don't-long cash in fact) The mutuals you suggest are not traded on the exchanges like ETFs or are they? Your post is not entirely clear to me-I may be tired. Is RYURX on the NYSE? I have only ever traded on the TSX, although Waterhouse also does the NYSE (I've shied away from US dollar denominated assets with good reason?) Or alternatively you were refering to an ETF (short index fund) that is primarily involved in shorting the market? As you are aware I am merely the dim witted hillbilly cousin of you guys who are regulars here.
Posted: Mon Dec 31, 2007 10:47 am Post subject: Re: Trader's Corner 2008
Quote:
RYDEX
Quote:
Expense ratio is for the fiscal year ended 3/31/2007. Total annual operating expenses vary by share class. See the prospectus for information on the fees and expenses that apply to each share class. Performance shown reflects maximum sales charges or contingent deferred sales charges (CDSC) as applicable. Class A-shares have a maximum sales charge of 4.75%. Class C-shares have a maximum CDSC of 1% for shares redeemed within 12 months of purchase.
$25,000 minimum investment
about 1.3% expense ratio
4.75% sales charge per the above
I am not saying anyone should do this or not do this, except to say that you had better be pretty confident that the S and P will go down by more than 6.5% because that is what you need to recoup your original investment.
If you take your $25K and put it into a CD at the bank at 3.9%, you are up roughly 10% compared to this alternative. That is, provided that the bank does not go under.
This is still not to say that it would be a bad investment. If you really, firmly believe that this year equals 1929, and the stock market will lose 1/3 of its value, then it is a chance to fatten up.
Posted: Mon Dec 31, 2007 5:03 pm Post subject: Re: Trader's Corner 2008
Sorry about the annoying double post:
I have been thinking about this all day, which I suppose is pretty lame considering it is New Year's Eve, but Mr. Bill's question is really serious, and there are a lot of problems, as partly illustrated by the conversations above:
The "invention" of the 401K has also caused a lot of problems because of the tax-deferred nature of the system. The investor benefits on the front end from a higher return, which was the original point, but you lose a lot of flexibility if you want to cash it and run for the hills, like right now for example. So, there is probably quite a bit of money in the market that the owners would prefer to have elsewhere.
But, to summarize:
You don't want to cash everything out and put your money in a mattress because if there really is somewhere between 3 and 13% inflation right now, you are losing this much purchasing power every year. The same thing goes with bank CD's or even short term Federal money market funds, which are the closest thing to risk free, but the returns are so bad, you still end up potentially negative after inflation.
You could put your dollars into Euros or Swiss Francs, which you would like to do because of the dollar depreciation issue, but you don't want to because some currency broker or bank will charge you an arm and a leg each way on commission.
You really would like to invest in China, via some index-type mutual fund, but there are two problems: You do not know what will happen to them if there is a hell of a recession in the US, since we are their customer, and also, right now, their stock markets are so overinflated and due for a correction, you might lose your butt.
You might want to invest in some index-type European stock fund, but every day you hear some report to the effect that these guys have abandoned their historical conservative nature and put a lot of money into supposed US AAA rated paper which has turned out to be BS rated because it consists of a lot of people who cannot pay their mortgage.
You might want to invest in real estate, but there is no assurance that everything has hit bottom yet. Farmland is a possibility, but the value of farmland is a function of the currently overinflated commodity prices, and therefore a little pricey. Residential rental housing, I am thinking there is a possibility on this, but this has to be more of an "active" investment, since you will need to find tenants, etc. Maybe if you are patient, raw land somewhere might hold its value, but you can't eat it, and you might have trouble selling it. Also, there are still some people around who are used to the property valuations being what they were two years ago, and have not yet "capitulated" to the correct pricing regime.
Gold, Silver, Precious Metals: Kind of tough to make a big commitment on this stuff at a 20-year high, by holding the actual object you have the same problem of broker commissions and ease of ability to sell it later on.
I have to say it might make sense to buy "stuff", that is, stuff that you can keep around for awhile and sell it later and make money. The problems are: if you have a lot of money, it is hard to find a place to store a whole lot of "stuff", which adds to your costs, you have to make sure the "stuff" is non-perishable, you have to make sure to buy the "stuff" cheap enough or non-retail so that you will be able to sell it when you need money in a year or so. There are just a lot of problems. Example: I would like to buy a couple of truckloads of copper tubing, because I figure in a year, this stuff will be really even more expensive because of Chinese demand, etc. but this stuff takes up a lot of space.
I was just in the local sporting goods store: A new Smith and Wesson .44 magnum (a la "Dirty Harry") retail right now is $1049.00. You have to pay sales tax, but I am thinking if you bought about 100 of these you would eventually come out okay. I will look one year from now and see what the price is and see if this would have been a good investment. A box of 50 Remington 9mm rounds target grade is about $20. Of course, if you want to buy this many of them, you can probably buy them direct from the factory for a lot less.
Antiques, old cars, artwork? All of this, beauty is in the eye of the beholder, and also partly dependent on enough people around with deep pockets who want to buy it from you later on. Also, kind of hard to just go out and sell it if you get hungry.
Oil stocks: I have to say that the big integrated oil companies like XOM and some others have fattened up for the last several years, but also, when the stock market starts to correct, like it did in July, these get kind of sick. Because they are in the big stock indices, they get caught in the program trading downdraft. The refiners: we know that TSO and VLO are down substantially from their highs of the summer, and so might be cheap enough. Oil Service: Might be good, except that a lot of them are at multi-decade highs.
So I have to say that what to do depends entirely on who you are, how much money you have, and more importantly, the likelihood of you needing the money in some short term time frame for whatever reason.
Another key issue is the problem that Bernanke has caused, and has been discussed at length for a year now: Bernanke is committed to keeping the stock market at a high level, rather than protecting the wealth of the US citizens. Based on this, he has cut interest rates. So there are multiple problems: dollar depreciation, the moral thing, where they are not allowing the markets to punish stupidity, the fact that no one knows what anything is worth, since all of these CDO's have not been written down yet, and no one knows what their real estate is worth, and probably most importantly, a low-risk investor does not want to loan out any money because the prevailing interest rate is less than the current inflation rate. So, the money in the system is drying up. Unfortunately this situation may continue on for quite awhile.
So I personally am torn, right now. What we need is a "cleansing" so that everything gets back to what its value ought to be, and we can get on with life, but I am afraid we will have to wait a year before we get it, since it is election year.
Joined: Oct 23, 2004 Posts: 5167 Location: New Jersey
Posted: Mon Dec 31, 2007 10:41 pm Post subject: Re: Trader's Corner 2008
drew wrote:
Thanks Dante!
Also for the caveats about not having all the eggs in one basket. (I don't-long cash in fact) The mutuals you suggest are not traded on the exchanges like ETFs or are they? Your post is not entirely clear to me-I may be tired. Is RYURX on the NYSE? I have only ever traded on the TSX, although Waterhouse also does the NYSE (I've shied away from US dollar denominated assets with good reason?) Or alternatively you were refering to an ETF (short index fund) that is primarily involved in shorting the market? As you are aware I am merely the dim witted hillbilly cousin of you guys who are regulars here.
Will look up that RYURX
Drew
I am not familiar with the fees incurred by directly buying thorugh Rydex, but it's probably on the web site posted by pup55 somewhere.
I have used some of the brokers where you also can buy Rydex funds, the list is here:
The fees are actually quite low as long as you don't sell usually before 3 or 6 months.
Rydex also has a number of ETFs which I assume you could buy on the market with any broker, including one energy ETF that appears to own most major energy/energy service companies.
Since the future is not entirely clear, it may be best to take one year at a time and just figure what is going to be good next year. Until inflation gets somewhat higher, a reverse/bear fund doesn't sound like a bad idea. _________________ It's already over, now it's just a matter of adjusting.
Joined: Jan 29, 2005 Posts: 358 Location: New Zealand
Posted: Tue Jan 01, 2008 4:55 am Post subject: Re: Trader's Corner 2008
Very interesting opening poll question for 2008, thanks MrBill.
Out here in farming and bush country this question has plagued me much (now that I have the real time to think about it while bringing in meat), and I have to say the answer from me is "Other" ... specifically CASH.
Play with the big boys. Feds and banks (debt merchants) are offloading their leverages as much as possible, and hoarding cash as dollars are constantly being destroyed. I see and expect further deflationary pressures across all asset classes listed above. Nobody lends, and even if they do, the cost of the lending increases. I refuse to be a bagholder of any sorts. Desperately finding ways to spread out current cash across insured institutional instruments around the world (hint:FDIC...)
If one sees the Fed or any other CBs as omnipotent NOT!!!, then 2008 is obvious. _________________ regards,
Rostov
"Some {} are more equal than others"
Posted: Tue Jan 01, 2008 10:40 am Post subject: Re: Trader's Corner 2008
I selected other.
PUTS/short positions on SPX500, FTSE and bank and real estate indices/stocks.
The reason are pretty obvious, the markets are still only pricing in a 30-40% chance of recession.
I believe all other asset classes (with the exception on bonds but they are exposed to inflation) you listed will suffer from a global recession. Even meat and milk consumption is correlated with economic growth.
Posted: Tue Jan 01, 2008 7:44 pm Post subject: Re: Trader's Corner 2008
Thanks guys for all the input and ideas.
My biggest concern is paying off my line of credit if tshtf. Accordingly I have been long cash this year for that reason. It is not a winning strategy though as Waterhouse pays 1% interest on can. funds in an RSP trading account. I'm not too enamoured with the 4% they pay for US dollar exposure either due to the state of things down there.
Is anyone into a strategy J Cramer would suggest such as buying consumer cos like P&G? I have a list in a similar vein called the 'poverty portfolio' which invests in payday loan outfits and dollar stores. It sounds crazy in a good way doesn't it? I know that any dollar store I've been to is busy as hell. I don't know what exchange in America these are on but here they are:
fcfs
ndn
dg
dltr
aea
csh
ezpw
occo
As for precious metals I own CEF and have since gold was 400$ My position is half the size it was when I first bought in 2 years ago so I feel relatively comfortable with this particular holding.
I am warming to the idea of options. Perhaps I could get the trading account upgraded. I'll have to do some homework that's for sure. Shorting the market scares me though. The idea of being wrong and having to cover my shorts doesn't sit well.
Posted: Wed Jan 02, 2008 1:42 pm Post subject: Re: Trader's Corner 2008
I often use speadbetting to limit risk rather than buying actual options or futures. Although I have long dated oil options.
With spreadbetting you can limit your risk with stop losses. I would recommend shorting indices when new economic reports are made to the market. Keeping a rolling exposure is a little risky because the market will be volatile much of the time. If you are not particularly good at technical analysis I would recommend sticking to key fundamental news points. You can see a list of data here http://www.gftforex.com/resources/calendar/calendar.asp and here http://www.bloomberg.com/markets/ecalendar/index.html.
For example, the ISM report released today was far lower than expected and the S&P 500 index fell 20 points so far today. I opened a new short a minute before the report was released. I only bet 150 GBP per point and had a stop loss 1 point above my opening position so my maximum loss was .7 points for the transaction cost of the bet plus the maximum loss of an additional 1-point so total loss risk was 255 GBP. So I am up around 3k at the moment plus it is tax-free. It is obviously high risk but also high reward so if you trade carefully and intelligently and keep the bets affordable it is a good way to get exposure to economic trends.
Posted: Thu Jan 03, 2008 7:59 pm Post subject: Re: Trader's Corner 2008
to: mkwin
Q? how long do you hold onto your contracts?
I like to hold mine for about 4 weeks or less.
I'm just curious if there's any other speculators out there.
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