Weekly Positions Update - 12/30/07

Happy New Year's everyone! Last post for the year here - back in '08, ready to first recap '07 and yearly returns since inception in '05, then it's time to figure out the year ahead!

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss
12/07/07	Long	1	MAR 08	Corn			415	451 3/4	$1,837.50
12/14/07	Long	1	MAR 08	Corn			439	451 3/4	$637.50
12/20/07	Long	1	MAR 08	Cotton			66.45	67.89	$720.00
11/09/07	Long	1	MAR 08	Coffee 'C'			126.05	133.25	$2,700.00
12/26/07	Long	1	MAR 08	Oats			308 3/4	303	($287.50)
12/21/07	Long	1	APR 08	Platinum			1531.0	1537.1	$305.00
12/21/07	Long	1	MAR 08	Rough Rice			13.840	13.970	$260.00
12/21/07	Long	1	MAR 08	Rough Rice			13.855	13.970	$230.00
11/28/07	Long	1	MAR 08	Soybeans			1108	1223	$5,750.00
12/20/07	Long	1	MAR 08	Sugar #11			11.10	10.95	($168.00)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	11.38	$2,979.20
08/01/07	Long	1	JUL 08	Sugar #11			10.48	11.38	$1,008.00
12/20/07	Long	1	JUL 08	Sugar #11			11.37	11.38	$11.20
10/18/06	Long	1	JUL 08	Sugar #11			12.08	11.38	($784.00)
12/27/07	Long	1	FEB 08	Mini Gold			834.5	842.6	$268.92
12/21/07	Long	1	MAR 08	Mini Soybeans			1192 1/2	1223	$305.00
Net Profit/Loss On Open Positions:									$15,772.82

Current Cash Balance	$59,367.65
Open Trade Equity	$15,772.82
Total Equity	$75,140.47
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$75,140.47

Cashed out: $5,000.00
Total value: $80,140.47

Weekly return: 4.53%

Four Important Charts

Four nice charts related to gold and the dollar from GoldMoney.com.

No doubt which way the long-term trend is, and I don't see any catalysts to reverse it on the horizon.

Corn or soybeans - which to plant?

This article from the AP speculates that farmers may be tempted to switch some plantings from corn back to soybeans this year, but that it's too early to forecast.

Beans are up huge again this morning (March @ 1236 as I type), so this wave is not showing signs of slowing down yet.

Weekly Positions Update - 12/23/07

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss
12/07/07	Long	1	MAR 08	Corn			415	443 1/2	$1,425.00
12/14/07	Long	1	MAR 08	Corn			439	443 1/2	$225.00
12/20/07	Long	1	MAR 08	Cotton			66.45	66.58	$65.00
11/09/07	Long	1	MAR 08	Coffee 'C'			126.05	133.85	$2,925.00
12/21/07	Long	1	APR 08	Platinum			1531.0	1522.5	($425.00)
12/21/07	Long	1	MAR 08	Rough Rice			13.840	13.875	$70.00
12/21/07	Long	1	MAR 08	Rough Rice			13.855	13.875	$40.00
11/28/07	Long	1	MAR 08	Soybeans			1108	1196	$4,400.00
12/20/07	Long	1	MAR 08	Sugar #11			11.10	11.12	$22.40
06/04/07	Long	2	JUL 08	Sugar #11			10.05	11.45	$3,136.00
08/01/07	Long	1	JUL 08	Sugar #11			10.48	11.45	$1,086.40
12/20/07	Long	1	JUL 08	Sugar #11			11.37	11.45	$89.60
10/18/06	Long	1	JUL 08	Sugar #11			12.08	11.45	($705.60)
12/21/07	Long	1	MAR 08	Mini Soybeans			1192 1/2	1196	$35.00
Net Profit/Loss On Open Positions:									$12,388.80

Current Cash Balance	$59,490.07
Open Trade Equity	$12,388.80
Total Equity	$71,878.87
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$71,878.87

Cashed out: $5,000.00
Total value: $76,878.87

Weekly return: 7.20%

Beer crisis: This is serious

From The Economist:

"The decrease in hop production, put at some 50% over the past decade, has sent prices through the roof."
Full article

Book Review: Winner Take All by William Gallacher

Winner Take All: A Top Commodity Trader Tells It Like It Is by William R. Gallacher is a great read. Gallacher is a pure fundamentals guy who dismisses technical analysis by itself, but recognizes its importance in the context of an overall system.

Here's the jist of Gallacher's discussion:
* Fundamentals rule the day - technical analysis by itself is worthless.
* That being said, you need some technical entry and exit system to support your trading system.
* All technical only systems are pure crap - Fibonacci, Gann, etc are great only when applied to historical data.
* Risk management is very important so that you don't go bust - he lists suggested position sizes for various situations.
* Your entry/exit system does not matter, as long as it's consistent. Gallacher employs a 10-day breakout entry and exit in his text.

It makes a lot of sense to me that Gallacher says fundamentals should determine which side of the market you are on. Would anyone want to be short grains and oil today, even if the technicals were bearish? That's too scary for me. In a bull market like this, I want to be long only.

The book is a bit over 200 pages and an extremely enjoyable read. I cranked it out on a recent overseas plane ride. I normally prefer to read stuff like this, with heavy content, much slower so that I have a chance to digest. However Gallacher writes with such clarity and humor that I was able to plow through. I will need to re-read at least once in the near future.

Kevin Kerr's Hot Commodities for '08

Over at Agora, commodities guru Kevin Kerr listed his hot commodities for '08.

In short, he likes the soft commodities - especially cocoa, coffee, and sugar. Both coffee and sugar have been pushing higher over the past couple of weeks.

I picked up another sugar contract this morning in an attempt to pyramid this rise. Hopefully it will continue!

Weekly Positions Update - 12/16/07

Yesterday I pounded through a great read, Winner Take All: A Top Commodity Trader Tells It Like It Is, by William R. Gallacher. I'll gather my thoughts and post what I took away shortly.

Overall on the portfolio side, I'm sure you notice some major changes from about a month ago (when things were running quite reckless and out of control). I am doing my best to reform my old ways - here's how I'm currently approaching things:

1. Since we're in a flat out bull market for commodities, I'm buying anything that hits a 20-day high. Anything. Could be crude oil, feeder cattle, or sugar - doesn't matter. Everything goes higher in a bull market, so I'm letting the market sift these out rather than me buying and holding something - which I have been doing.
2. If a current position hits a 20-day low, I sell. Again, no questions asked. I'll re-enter the position on a new 20-day high. Easy - automates the exiting process.
3. Not have more than 25-30% of the portfolio "at-risk" at any given moment. In other words, if the world went to hell in a handbasket in 0.001 seconds flat, here's what I would lose.
1. I'm working on a spreadsheet to calculate this, which I am still tinkering with. I'll share when finished. Basically the idea is that I have trailing stops at the 20-day low of each position. The difference between the current price and the stop (times the amount of leverage) equals how much I can lose on that position.
4. The new return goal is 2% per week. If I break this, great. The idea is to try not to lose money in a given week. I figure if I can hit this # approximately, the returns will be great. Helps me to focus on the weekly # rather than trying to triple my portfolio in a year (which is what 2% will do over 52 weeks)
   

This week in the market, we've seen a big rally in the softs and the grains. My entry method put me into corn and soybeans a couple of weeks ago, and I am thankful for it this week. How about that to instill some confidence! Sugar is also showing some life - nice to have you back, sugar!

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss
12/07/07	Long	1	MAR 08	Corn			415	438 1/4	$1,162.50
12/14/07	Long	1	MAR 08	Corn			439	438 1/4	($37.50)
11/09/07	Long	1	MAR 08	Coffee 'C'			126.05	133.80	$2,906.25
11/28/07	Long	1	JAN 08	Rough Rice			13.080	13.125	$90.00
11/28/07	Long	1	MAR 08	Soybeans			1108	1175	$3,350.00
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.84	$1,769.60
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.84	$403.20
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.84	($1,388.80)
Net Profit/Loss On Open Positions:									$8,255.25

Current Cash Balance	$58,796.45
Open Trade Equity	$8,255.25
Total Equity	$67,051.70
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$67,051.70

Cashed out: $5,000.00
Total value: $72,051.70

Weekly return: 12.75%

Cotton Crop Report Neutral

A USDA cotton report looks neutral in terms of cotton acreage. Traders have been poring over the report, looking for indications that the cotton crop will get the cold shoulder in lieu of higher priced grains.

I agree - that's what 'should' happen. Though I'm waiting for a breakout (20-day high) in the cotton market before entering.

XMas tree futures?

I say that partially in jest.

According to Agora, Chinese demand for Christmas trees is causing a sudden price run-up in Germany.

Weekly Positions Update - 12/09/07

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
11/12/07	Long	1	DEC 07	Australian Dlr	0.8795	0.8765	($300.00)
11/16/07	Long	1	DEC 07	Australian Dlr	0.8850	0.8765	($850.00)
12/07/07	Long	1	MAR 08	Corn	415	417	$100.00
11/09/07	Long	1	MAR 08	Coffee 'C'	126.05	131.00	$1,856.25
11/28/07	Long	1	JAN 08	Rough Rice	13.080	12.955	($250.00)
11/28/07	Long	1	MAR 08	Soybeans	1108	1142	$1,700.00
06/04/07	Long	2	JUL 08	Sugar #11	10.05	10.38	$739.20
08/01/07	Long	1	JUL 08	Sugar #11	10.48	10.38	($112.00)
10/18/06	Long	1	JUL 08	Sugar #11	12.08	10.38	($1,904.00)
Net Profit/Loss On Open Positions:							$979.45

Current Cash Balance	$58,489.60
Open Trade Equity	$979.45
Total Equity	$59,469.05
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$59,469.05

Cashed out: $5,000.00
Total value: $64,469.05

Weekly return: 2.37%

Where's the Beef

It's all going to China! Surprise, surprise.

Nice article detailing what you could probably infer - meat demand in China is increasing rapidly. It's interesting to think about all the downstream ramifications - increased grain and water demands. The beauty of a true bull market!

Back in the USSR

I've been all fired up the last couple days about Comrade Paulson's housing bailout - Paulie, are you kidding me???

Instead of ranting and raving myself (it could get out of hand), here's a roll call of the excellent articles I've read this week putting the plan in perspective (a very scary perspective if you believe in freedom and free markets). Best enjoyed with a warm glass of whiskey.

God help us all.

• Agora's Eric Fry (one of my favorite financial columnists)
  
• Motley Fool's Seth Jayson (excellent article and analysis)
• Secrets of Traders' Larry
  

Nice Long Term Gold/Silver Charts

These nice long term log charts from GoldMoney.com help put the current bull market in perspective.

Some high level takeaways for me:

1. This is a tough market to play around on the short side of - long only for me
2. It's important that your entries and exits keep you in the game for these nice moves up

I'm still waiting for a 20-day high to get back in - haven't seen this yet, just some major seesaw action for the last month. Many people smarter than me advocate just buying now and accumulating at these 'cheap' prices - something to consider for sure.

Slowing Aussie Retail Sales

Hopes for a near term Aussie bounce are looking dimmer - from today's Daily Pfennig:

In Australia overnight... Retail Sales slowed for a second month only advancing .2% in October, although September's sales were revised upward to .7%, this October reading has put a lid on any rate increase before year-end... The Reserve Bank meets tonight to discuss rates, and at one time I held out hope for another rate hike before year-end... Unfortunately, this Retail Sales report probably put a damper on that rate hike, now, at least...

This won't help the sagging A$ either... With Carry Trades being unwound, the high yielders get taken to the woodshed and beaten like a rented mule... And with no support from the Central Bank, rate hike wise, the A$ will probably have to remain in the woodshed even longer...

If the Carry Trades are truly being unwound, and it's not another false dawn, look for yen and Swiss francs to become the last ones on the roster but number ONE in the hearts of the fans!

The Aussie chart does not look great either, but there does appear to be some support around the .8650 mark. As much as it hurts to take such a large bath on one position, it will likely be time to sell if it drops below the support levels. Contracts are trading at .8719 as I type this.

Stratfor: Oil Prices Will Plummet When Asia Cracks

I read an interesting counterpoint to the "oil is never going lower" argument this morning in my morning Stratfor brief (subscription required).

Here's a quick summary:

• In the '97 - '98 Asian financial crisis, crude fell as low as $8/barrel
• High oil prices today depends upon continued growth of Asian economies
• The questionable characteristics of Asian financing -- subsidized loans and the tendency to prioritize full employment and expansion of market share above rates of return, efficiency and profitability -- have not disappeared since 1998
• China escaped the carnage in 1998, but they have a very "Asian" economy today
• China - and Asia - could crack again, which would send oil prices plummeting

Whether you agree or disagree, it's important to at least recognize the possibility of a major pullback.

Pullback in Commodity Prices Hurts Aussie $

From Today's Daily Pfennig:

The Australian dollar fell over the weekend as a combination of the unwinding of the carry trade and reports of a widening trade deficit combined to work against the AUD$. The currency also weakened as the price of commodities that Australia exports stayed near the lowest in two months. The trade deficit expanded to just under A$ 3 million in October from a revised A$ 1.92 million a month earlier. Falling prices of commodities, which contribute about 17 percent to Australia's economy was the main reason for the rising deficit. We probably haven't seen the end of the volatility in the Australian dollar, but remain confident that the A$ will hold its value in the log run. Both China and India will continue to grow, and their demand for commodities will expand with the growth of their economies. This growing demand will keep a floor under the Aussie dollar.

Weekly Positions Update - 12/02/07

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss
11/12/07	Long	2	DEC 07	Australian Dlr			0.8795	0.8839	$880.00
11/16/07	Long	1	DEC 07	Australian Dlr			0.8850	0.8839	($110.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.8839	($2,990.00)
11/09/07	Long	1	MAR 08	Coffee 'C'			126.05	128.65	$975.00
11/28/07	Long	1	JAN 08	Rough Rice			13.080	12.870	($420.00)
11/28/07	Long	1	MAR 08	Soybeans			1108	1097 1/2	($525.00)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.21	$358.40
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.21	($302.40)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.21	($2,094.40)
10/31/07	Long	1	DEC 07	Swiss Franc			0.864500	0.8860	$2,687.50
11/21/07	Long	1	DEC 07	Swiss Franc			0.908100	0.8860	($2,762.50)
Net Profit/Loss On Open Positions:									($4,303.40)

Current Cash Balance	$62,395.10
Open Trade Equity	($4,303.40)
Total Equity	$58,091.70
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$58,091.70

Cashed out: $5,000.00
Total value: $63,091.70

Inflation on the Way

Nice, but scary, article in today's Rude Awakening

It's frightening how much free cash the central banks are pumping into the system - M3 rose 12% year over year (yikes)!

It's hard to see this ending well.

Jim Rogers' Hot Commodities Review

Nice review/discussion in today's Daily Reckoning

Trade Alert - Selling Cotton

Similar deal as coffee - it's at the lowest point since September.

We'll keep a close eye on this one from the sidelines - I believe cotton will eventually skyrocket.

Coffee trending down

Coffee appears to be trending down again, toward previous support at the 122.50 mark.

According to my new system, I will sell if it hits a 20 day low, and will buy back in on a 20 day high.

So we'll keep an eye out and see if coffee breaks down further.

Still long term bullish on coffee, but using our entry system we should be able to capture most of the upswings, while protecting ourselves on the downside.

New Trading Outlook

I just finished reading Trade Your Way To Financial Freedom by Van K. Tharp. Great read, and it really opened my eyes to several mistakes I am making in my trading - which is why my account is left open to so many major losses. This is dangerous when trading with limited capital, as I am.

Here were the big things I took away:

1. Need to have your beliefs about the market in line with your trading philosophy.
I think I'm in good shape here. I believe that we are in a secular commodities bull market, and that the long term trend of the US dollar is down.

2. Trade with the trends - have a system to enter positions long on the rise, and exit when the trend turns.
I have failed this part miserably, often trying to time the exact bottom of positions and buying things "all the way down" - like my current sugar positions. Several methods are described in the book to identify these trends.

3. Limit your losses and let your winners run.
My winners run, but so do my loser. I need to start using stops in order to limit the downside of my positions. As my account stands today, I could lose 50% in a day and have no way to prevent that.

4. Properly size positions to manage risk
Bottom line is that you have a finite amount of capital, and you need to be able to survive a downturn. If you let everything ride on every spin of the wheel, you're going to get wiped out sooner or later. Deep down I knew this, but I'll admit that I was blinded by greed and didn't want to learn more, for fear I would need to scale back.

This week I plan to put in stops on my positions to limit downside risk. I'll also evaluate my total capital at risk, and may scale down accordingly.

Overall this book is a solid read and really opened my eyes to these concepts.

Weekly Positions Update - 11/25/07

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss	Market Value
11/12/07	Long	2	DEC 07	Australian Dlr			0.8795	0.8804	$180.00
11/16/07	Long	1	DEC 07	Australian Dlr			0.8850	0.8804	($460.00)
11/01/07	Long	2	DEC 07	Australian Dlr			0.9135	0.8804	($6,620.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.8804	($3,340.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.8804	($3,340.00)
11/08/07	Long	1	DEC 07	Australian Dlr			0.9262	0.8804	($4,580.00)
11/09/07	Long	1	MAR 08	Cotton			68.97	65.60	($1,685.00)
04/16/07	Long	1	DEC 08	Cotton			64.50	72.73	$4,115.00
11/09/07	Long	1	MAR 08	Coffee 'C'			126.05	126.60	$206.25
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.25	$448.00
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.25	($257.60)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.25	($2,049.60)
10/31/07	Long	1	DEC 07	Swiss Franc			0.864500	0.9074	$5,362.50
11/21/07	Long	1	DEC 07	Swiss Franc			0.908100	0.9074	($87.50)
Net Profit/Loss On Open Positions:									($12,107.95)

Current Cash Balance	$73,008.68
Open Trade Equity	($12,107.95)
Total Equity	$60,900.73
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$60,900.73

Cashed out: $5,000.00
Total value: $65,800.73

Correction in Gold - How Much Longer?

It's a fool's game to try and pick the exact moment of the turnaround. I prefer to stay on the sidelines right now until the gold correction is through. If you believe it is still a bull market in gold, there will be plenty of money to be made on the next upswing.

If gold is indeed going to the moon, it will make little difference if you bought back in at $760, $780, or $800.

James Turk on why the bull is still alive and well.

Rogers: Bernanke is a "total fool"

Man I love this guy.

``If you have dollars, I urge you to get out,'' Rogers said in an interview from Singapore. He is chairman of New York-based Rogers Holdings, formerly known as Beeland Interests Inc. ``That's not a currency to own.''

Full article

Aussie $ Continues to Rebound

In case you missed it, the Aussie $ got trashed during Monday's dollar rally and carry trade unwinding. It was off about 4% on the day - ouch!

I personally had to scale back some other positions in order to stay liquid through it. Was something I've been meaning to do anyway - needed to scale back the leverage overall.

After dropping below the 0.88 mark on Monday, the Aussie has rallied nicely and it close to 0.90 as I write this. Here are comments on the situation from my favorite currency guy, Chuck Butler of the Daily Pfennig:

"The Reserve Bank of Australia will find it hard to get out of the rate hiking game as inflation has really jumped over their 2-3% target hitting 3.25%... Knowing the Reserve Bank as I do... I expect them to take the view point that they have more work to do, with regard to interest rates... And that thought alone could help Aussie get back on track toward the high 90's!"

Weekly Positions Update - 11/11/07

Story of last week for me was the carry trades unwinding. With the stock markets getting slammed, traders and investors are running away from risk. When that happens, the carry trade unwinds fast and furious.

The Swiss Franc and the Yen, the two currencies that are borrowed for the carry trade, both rallied strong on the unwinding.

Unfortunately for me, the Aussie dollar got slammed from mid-week on. The Aussie has been a beneficiary of the carry trade, so it takes a hit (usually temporary) when this unwinds.

I have to admit I got pretty carried away as the Aussie dropped, and kept buying...and buying...and buying. Thus I head into tomorrow morning with a dangerous 7 positions in the Aussie dollar. Leverage and huge positions like this are very irresponsible, but at least it's entertaining for you. I'll be the one at my computer screen watching every tick, wanting to vomit on any down draft.

Here's hoping for a quick swing up so that I can unload some positions. In case you're on the sidelines right now, I think 0.91 is a steal for the Aussie - it could rally to 0.93 or 0.94 easily within the next couple of weeks.

Date	Position	Qty	Month/Yr	Contract	Strike	Call/Put	Entry Price	Last Price	Profit/Loss	Market Value	Action
11/01/07	Long	2	DEC 07	Australian Dlr			0.9135	0.9117	($360.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.9117	($210.00)
11/09/07	Long	1	DEC 07	Australian Dlr			0.9138	0.9117	($210.00)
10/29/07	Long	1	DEC 07	Australian Dlr			0.9188	0.9117	($710.00)
11/08/07	Long	1	DEC 07	Australian Dlr			0.9262	0.9117	($1,450.00)
10/31/07	Long	1	DEC 07	Australian Dlr			0.9285	0.9117	($1,680.00)
11/09/07	Long	1	MAR 08	Cotton			68.97	69.31	$170.00
01/22/07	Long	1	DEC 08	Cotton			63.00	75.03	$6,015.00
04/16/07	Long	1	DEC 08	Cotton			64.50	75.03	$5,265.00
11/09/07	Long	3	MAR 08	Coffee 'C'			126.05	126.10	$56.25
03/29/07	Long	1	NOV 09	Soybeans			828	945	$5,850.00
09/26/07	Long	1	MAR 08	Sugar #11			10.02	10.04	$22.40
08/11/06	Long	1	MAR 08	Sugar #11			14.50	10.04	($4,995.20)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.31	$582.40
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.31	($190.40)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.31	($1,982.40)
10/31/07	Long	1	DEC 07	Swiss Franc			0.864500	0.8927	$3,525.00
10/31/07	Long	1	DEC 07	Mini Gold			789.2	834.6	$1,507.28
10/31/07	Long	1	DEC 07	Mini Gold			797.2	834.6	$1,241.68
10/31/07	Long	1	DEC 07	Mini Gold			797.3	834.6	$1,238.36
Net Profit/Loss On Open Positions:									$13,685.37

Current Cash Balance	$74,107.28
Open Trade Equity	$13,685.37
Total Equity	$87,792.65
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$87,792.65

Cashed out: $5,000.00
Total value: $92,792.65