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

Rogers says Bernanke is "A Nut"

Bloomberg article

Weekly Positions Update - 11/04/07

Shed about 3K this week, mostly because of coffee. Damn rain in Brazil is killing me.

Anyway a few new entries and old friends revisited:

* The gold contracts were added when Bernanke dropped his pants. Gold broke the important $800 mark and is showing no signs of slowing down. Still a decent entry point if you're not in the trade yet. I keep waiting for a correction - it has pretty much gone straight up for awhile here - but no signs of one at all.

* Loaded up on Aussie dollars again on Friday. When the market tanked on Thursday, carry trades were unwound which trashed the Aussie. This is getting to be a recurring theme. Anyway, this changes nothing. The Aussies are still going to have to raise interest rates later this year or early next. It's heading to parity - not a matter of it, but when.

* Bought some Swiss Franc's on the tip from our buddy Jim Rogers. Great interview here if you haven't seen it yet with the Financial Times. He mentions the Swiss Franc as one of his top rec's right now - he says when the carry trade ends someday (and it will), the Swiss Franc and Yen will pop. Saw this on Thu/Fri with the carry trade unwinding - I already have a nice gain on my position.

Also read this from Chuck Butler in the Daily Pfennig: Swiss National Bank (SNB) Gov. Roth, told the press that he will "take the necessary measures on interest rates should the franc's weakness stoke inflation." WOW! I can tell you this, he's directing that talk at the Carry Trade vultures that have preyed on the Swiss franc because of the low interest rates there... Look for franc strength from these words.

* The grains - a crappy week altogether. But these are all just waiting to pop, so we wait. Maybe not this month, maybe not next, but they all have a big run in them in the next few years.

The current positions:

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	0.9171	$720.00
10/29/07	Long	1	DEC 07	Australian Dlr			0.9188	0.9171	($170.00)
10/31/07	Long	1	DEC 07	Australian Dlr			0.9285	0.9171	($1,140.00)
09/24/07	Long	1	DEC 07	Cotton			66.00	64.31	($845.00)
01/22/07	Long	1	DEC 08	Cotton			63.00	75.21	$6,105.00
04/16/07	Long	1	DEC 08	Cotton			64.50	75.21	$5,355.00
07/27/07	Long	1	DEC 07	Coffee 'C'			115.30	119.90	$1,725.00
06/19/07	Long	1	DEC 07	Coffee 'C'			120.50	119.90	($225.00)
09/26/07	Long	1	DEC 07	Coffee 'C'			129.50	119.90	($3,600.00)
03/29/07	Long	1	NOV 09	Soybeans			828	930	$5,100.00
09/26/07	Long	1	MAR 08	Sugar #11			10.02	9.94	($89.60)
08/11/06	Long	1	MAR 08	Sugar #11			14.50	9.94	($5,107.20)
06/04/07	Long	2	JUL 08	Sugar #11			10.05	10.12	$156.80
08/01/07	Long	1	JUL 08	Sugar #11			10.48	10.12	($403.20)
10/18/06	Long	1	JUL 08	Sugar #11			12.08	10.12	($2,195.20)
10/31/07	Long	1	DEC 07	Swiss Franc			0.864500	0.8694	$612.50
10/31/07	Long	3	DEC 07	Mini Gold			789.2	809.3	$2,001.96
10/31/07	Long	1	DEC 07	Mini Gold			797.2	809.3	$401.72
10/31/07	Long	1	DEC 07	Mini Gold			797.3	809.3	$398.40
Net Profit/Loss On Open Positions:									$8,801.18

Current Cash Balance	$71,592.01
Open Trade Equity	$8,801.18
Total Equity	$80,393.19
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$80,393.19

Cashed out: $5,000.00
Total value: $85,393.19