Tuesday, July 29, 2008

Daily Pfennig: Dollar Slide to Continue, Interest Rates to Rise

Chris Gaffney of the Daily Pfennig writes this morning:

"The situation here is bad and seems to be getting worse. The major question remains: Who will be standing in line to purchase all of this debt? And what happens to the dollar if/when foreign investors decide they have enough IOUs from the US Treasury and need to be enticed to purchase more. The result will be higher rates here in the US as fewer buyers will demand higher interest to encourage them to purchase the new debt. Another way for the US to entice foreign investors is to lower the value of the US$ in order to make these new Treasury securities cheaper to purchase. I believe we will likely see a combination of the two, higher rates along with a falling US$."

Chris and Chuck at the Daily Pfennig are about as sharp as they come - I follow these guys closely, they are usually right on the mark. Sometimes early into a trend, but usually on the correct side.

Monday, July 28, 2008

Jim Rogers Video from 7/18/08

Here's our buddy Jim being interviewed by the UK newspaper the Telegraph - good old Jim is cheery as always, and predicts the US central bank will fold within the next decade or two, because it is "so bad".

Sunday, July 27, 2008

Kevin Kerr Interview on BNN (video)

Kevin Kerr discusses the current resource situation with BNN
  • Likes gold and silver (has $1200 price target for gold, may hit this year he believes)
  • Thinks oil will trade between $85 and $105 for a bit, before continuing its rise
  • Current correction in base metals and grains is a good thing for traders looking to enter the long side, as prices got out of hand for awhile

Current Commodity Futures Positions - 7/27/08

Current thoughts on these futures markets:

Australian dollar - Of course, what would a currency trade be without a trip to the wrong side of the ledger? I've decided I am no longer using breakouts to determine my entry points with currencies, and have jumped into the Aussie on what I deemed a 'pullback'. Since, the market has pulled farther back.

Even so, I still like the Aussie to reach parity with the US dollar (probably sooner rather than later). You've got the nice interest rate differential, and you've also got a commodity currency vs. a make believe currency backed by the faith of the US gov't.

Cotton futures - Bounced a bit. They have to head higher eventually. Jim Rogers, in his talk at the Agora Investment Symposium this week, named sugar, cotton, and coffee as his favorite commodities right now.

Corn futures - Still in free fall to start the week, have since bounced a bit. Remember corn started the year at $4, so it is still up nearly 50% on the year. Traders are in waiting mode right now, trying to figure out how this year's crop is looking - and right now, despite the flooding, it looks pretty good.

Potential trades on the horizon for me:
  • Long sugar
  • Long coffee
  • Short US treasuries (esp. 10 year)
  • Long Swiss Franc
  • Long Japanese Yen
  • Long Live Cattle
  • Long Lean Hogs
Open Positions
Date Position Qty Month/Yr Contract Entry Price Last Price Profit/Loss
07/23/08 Long 1 SEP 08 Australian Dlr 0.9567 0.9497 ($700.00)
06/17/08 Long 1 DEC 08 Cotton 82.20 74.80 ($3,700.00)
07/14/08 Short 1 DEC 08 Mini Corn 688 599 $890.00
Net Profit/Loss On Open Positions: ($3,510.00)

Account Balances
Current Cash Balance $80,487.27
Open Trade Equity ($3,510.00)
Total Equity $76,977.27
Long Option Value $0.00
Short Option Value $0.00
Net Liquidating Value $76,977.27

Cashed out: $15,000.00
Total value: $91,977.27

Weekly return: Hell, let's just call it even...don't feel like digging out the spreadsheet
YTD return: 16.8%...roughly

***BTW, I usually "cash out" money just to pay for taxes, rent, and cheap beer. So total value is all pre-tax.

Saturday, July 26, 2008

Bud Conrad: Why Food Prices Will Continue to Rise

Bud Conrad is the Chief Economist at Casey Research, an offbeat, very insightful, investment research service that I subscribe to. Folks from Casey Research are rarely quoted in the mainstream press, as their level of thinking is a bit too deep for the dolts on regular financial news.

Here's a nice clip of Bud being interviewed on Fox Business of all places, where he explains why he believes food prices have a great deal more room to run.

Ron Paul on the Housing Bill

Clip of Ron Paul breaking down the housing bill for us laymen without the time or inclination to pore over 700 pages of legislation.

It made me a) sick, b) terrified for the future of our country, and c) calculate my current gold/silver holdings again in my head.

Tuesday, July 22, 2008

China Discovers Credit Cards

Oh man - if you thought the US could create a credit bubble, you ain't seen nothing yet.

The always entertaining Mogambo Guru of the Daily Reckoning comments that an increase in Chinese citizen credit card usage "is also in line with government goals."

This is a country that saves a huge percentage of their income, and has very little debt, so there is no shortage of dry powder raring to go. These people are not going to give up the amazing progress they've achieved over the past 5-10 years.

No matter what fate awaits the US, the commodity bull market is alive and well.

Monday, July 21, 2008

George Soros Goes Long Gold, Short Oil

Forbes article

Soros expects the oil/gold ratio to decline, closer to its historic average of 10. He expects gold to hold its ground, even if oil were to decline.

Current Commodity Futures Positions - 7/20/08

Keeping the faith here - strategy has been right generally on these trades, just poor timing. Ah well, it happens. I am re-evaluating my entries, as they have not been serving me well over the past few months.

Tried the short side of the grains market with the short on mini-corn, and that worked out well. However not enough to counter the bearish move in sugar. It looks overdone, and I hate to sell sugar at 12 cents - I mean, we're below the cost of production here.

Also keeping an eye on the meats. Looks like live cattle may be forming some sort of base here - we'll see.

Open Positions
Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss
06/17/08 Long 1 DEC 08 Cotton 82.20 72.83 ($4,685.00)
06/18/08 Long 1 OCT 08 Sugar #11 12.88 12.34 ($604.80)
07/01/08 Long 1 OCT 08 Sugar #11 13.90 12.34 ($1,747.20)
07/14/08 Short 1 DEC 08 Mini Corn 688 611 $770.00
Net Profit/Loss On Open Positions: ($6,267.00)

Account Balances
Current Cash Balance $83,288.02
Open Trade Equity ($6,267.00)
Total Equity $77,021.02
Long Option Value $0.00
Short Option Value $0.00
Net Liquidating Value $77,021.02

Cashed out: $15,000.00
Total value: $92,021.02

Weekly return: -5.3%
YTD return: 16.8%

***BTW, I usually "cash out" money just to pay for taxes, rent, and cheap beer. So total value is all pre-tax.

Wednesday, July 16, 2008

Dollar Going to Hell - Moved My Wife's 401K to Gold

Up until this Fannie/Freddie bailout fiasco, I was still a bit on the fence about gold and the dollar - thought that gold should continue to go up, dollar should continue to go down - but hated essentially selling the US short. And I kept rechecking my assumptions, trying to think of ways the US economy would turn around next, and how it would save the dollar.

Well yesterday I flushed those theories straight down the shitter. It's now clear to me that our gov't has absolutely no regard for our currency, and is only focused on short term fixes. And these short term fixes are going to damn the dollar - there's just no way around it.

I feel fortunate in a couple of ways. I had a similar gut feeling about the stock market in late January, and moved both of our 401K allocations into inflation indexed bonds. I felt stupid for a bit, since my timing was bad and I did it right before the fool's rally - now I feel very fortunate that I got out when I did.

Well I'm in the process of rolling over my 401K into a commodities brokerage IRA, so that I can put it in some hard assets. Meanwhile I've been inching my wife's allocations into this gold fund offered by her employer (what luck that is) - first just 10%, then up to 30% - and yesterday, I just moved the whole damn thing into gold.

Batten down the hatches, it could get very ugly - in fact, I think odds are it will get ugly for the dollar. So for me, it's time to heed Jimmy Rogers' advice, and get out of the dollar. It is, after all, a very flawed currency, as he says.

Tuesday, July 15, 2008

Corn and Live Cattle News and Thoughts

Tom Dyson writes in DailyWealth that he believes corn prices are set to drop sharply - and reiterates his favorite plays are live cattle.

After thinking about corn a bit, I also now believe that there is more risk on the downside. Potential catalysts for sending corn lower are the impending bust of corn-based ethanol, and a bumper crop. Catalysts that would send corn higher would be a wiped out crop. However with the bearish news that has come out in the past couple of weeks, it's looking more and more like the crop is fine.

I recently dipped my toe in this trade, and shorted the Dec Mini-corn contract yesterday. I may look to add another Mini contract or two on further weakness, and will close the position on any significant sign of price strength.

On the live cattle front, here's a quick take by Dennis Smith over at Barchart.com. He believes the recent sell-off in live cattle is overdone, and is looking to re-enter the position when support is found.

I still have one live cattle contract that - somehow - I have not been stopped out of yet. Hanging on by a thread. But I am also looking at the longer dated live cattle and lean hog contracts closely.

Monday, July 14, 2008

Jim Rogers: Fannie/Freddie Bailout Plan a Disaster

Rogers told Bloomberg the plan is an "unmitigated disaster" and that "they're ruining one of the greatest economies in the world."

Boy this really gets my blood broiling - confirms my belief that this country is going to get what's coming to it, good and hard. Protect yourself - buy gold.

Sunday, July 13, 2008

Current Commodity Futures Positions - 7/13/08

Another tough one - got to put it in the past, though. Facts are, this system works great when futures are going up, and not so great when they are going sideways/down. And lately, I just haven't been in the particular futures that are going up (oil looked nuts at $110 - who would have thoughts we'd see almost $150 so soon!)

Live Cattle Futures
Keeping the faith - I've been stopped out of most of my live cattle positions. Still like these a lot in the medium/long term, but have to respect the market. Will look to build these up again on strength. These were slightly disappointing, but I may have gotten into these a bit too late.

Sugar Futures
Oil has gone up 12x, from $12 to $144, over the last 10 years. Sugar is sitting at 13 cents, up from a multi-decade low of 5 cents. It's going higher, much higher, at some point in the next 5-10 years.

Cotton Futures
What a giant turd cotton has been for the last two years! Still, I think this turd will have it's day. Who the hell is still planting cotton with $7 corn and $15 beans???

Open Positions
Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss Market Value Action
06/17/08 Long 1 DEC 08 Cotton 82.20 73.65 ($4,275.00)
06/19/08 Long 1 FEB 09 Live Cattle 116.200 112.500 ($1,480.00)
06/18/08 Long 1 OCT 08 Sugar #11 12.88 13.97 $1,220.80
07/01/08 Long 1 OCT 08 Sugar #11 13.90 13.97 $78.40
Net Profit/Loss On Open Positions: ($4,455.80)

Account Balances
Current Cash Balance $85,756.63
Open Trade Equity ($4,455.80)
Total Equity $81,300.83
Long Option Value $0.00
Short Option Value $0.00
Net Liquidating Value $81,300.83

Cashed out: $15,000.00
Total value: $96,300.83

Weekly return: -7.5%
YTD return: 22.6%

***BTW, I usually "cash out" money just to pay for taxes, rent, and cheap beer. So total value is all pre-tax.

Thursday, July 10, 2008

Pickens Plan - T Boone Pickens' Plan for Energy

Makes a lot of sense, and who better to engineer a plan than Boone.

At it's heart - we have to expand wind power, where great potential lies in the Midwest. Using wind power for electricity can allow us to shift the use of natural gas from energy to transport fuels.

Marc Faber on Investment Outlook - Great Presentation

Really great info and insights here from Marc Faber on the near term and longer term economic outlook, from his vantage point.

I really love how he calls the Fed a "money printing machine." Interesting thing about his viewpoint is that, while he believes inflation will ultimately rule the day, he believe deflation will take hold in the short term, as the credit crunch worsens in the private sector.

Monday, July 07, 2008

Agora: Stimulus Checks Fuel Porn Industry

This is great - big thanks to Agora's 5 Minute Forecast for digging out this gem.

I suspect only a matter of time before Aurora Snow stars in Government Stimulus Package 2: Double Trouble.

A recent survey showed a surprising portion of Americans spent their stimulus checks on… porn? Heh… we found a study from the Adult Internet Market Research Co. (AIMRCo) this morning, and no -- it’s none of your damn business how we stumbled upon it.

Anyway, according to adult Web sites surveyed by AIMRCo, membership sales are up 20-30% since mid-May, when the stimulus checks began falling from the sky. Not only is that period historically a slow season for porn, but the survey revealed 32% of new members referred to the stimulus package as a reason to join an adult site or renew their memberships.

DailyWealth: Hogs to Hit Records Soon

The DailyWealth team has been all over this story - record corn prices, which will soon produce record hog prices.

Agree with the hypothesis 100%, but not sure if I completely agree with the way to play it. My plan is to keep an eye on those mid '09 contracts...wish I had kept an eye sooner, as I now see they have been moving up aggressively. However they look to be in the middle of a consolidation, and I'll look to enter on the next leg up.

Sunday, July 06, 2008

Current Commodity Futures Positions - 7/06/08

Well not a great week - disappointed in cotton especially, and coffee to end the week. A few thoughts on the positions:

Cotton Futures
Cotton broke sharply to the downside, as I managed to pin the tail on the local top. However I believe the downside here is limited, so I'm planning to hang on for a bit. Let's face facts - lowest level of cotton acreage in 25 years. It is going to $1+, just a matter of when. And with the Dec contract sitting at 75 cents, I like the odds of it going to $1 a lot more than I like the odds of it going to 50 cents (in fact I think if it goes much lower, it may be "back up the truck" time).

Coffee Futures
Coffee was looking strong until Friday, when the Sept contract shed 4 cents. Coffee's volatility always makes me sick to my stomach, and this ride with it is no different. Coffee's another crop that's been due for a mega-spike, and we just haven't seen it yet. Maybe this is the time, but if it's not, I'll look to exit quickly. However I may not be quick enough - this volatility can really nail you if it gaps down.

Sugar Futures
Looking strong, I'm planning to pyramid each cent up if this climb continues.

Live Cattle Futures
Holding tight here for now as well. Not looking to add, but watching these contracts closely. I like the Dec and Feb contracts more than I like the Oct. Everyone knows cattle is going higher, but is it already priced into the forward looking contracts? I think the upside potential still outweights any downside (which I view as minimal). However it's frustrating to see the meats trade in concert with the grains - I think no matter where the grains go from here, the input costs will still be sufficiently high to push the meats higher in the long term. However like it or not, they are trading in concert with the grains in the short term - and the grains are down big in Asia tonight as I type, so possibly look out tomorrow.

Open Positions
Date Position Qty Month/Yr Contract Strike Call/Put Entry Price Last Price Profit/Loss Action
06/17/08 Long 1 DEC 08 Cotton 82.20 75.86 ($3,170.00)
06/26/08 Long 1 SEP 08 Coffee 'C' 153.30 151.25 ($768.75)
05/08/08 Long 1 OCT 08 Live Cattle 105.350 111.525 $2,470.00
05/09/08 Long 1 OCT 08 Live Cattle 106.700 111.525 $1,930.00
06/16/08 Long 1 DEC 08 Live Cattle 112.750 114.500 $700.00
06/19/08 Long 1 FEB 09 Live Cattle 116.200 116.100 ($40.00)
06/18/08 Long 1 OCT 08 Sugar #11 12.88 13.89 $1,131.20
07/01/08 Long 1 OCT 08 Sugar #11 13.90 13.89 ($11.20)
Net Profit/Loss On Open Positions: $2,241.25

Account Balances
Current Cash Balance $85,609.47
Open Trade Equity $2,241.25
Total Equity $87,850.72
Long Option Value $0.00
Short Option Value $0.00
Net Liquidating Value $87,850.72

Cashed out: $15,000.00
Total value: $102,850.72

Weekly return: -5.3%
YTD return: 31.4%

***BTW, I usually "cash out" money just to pay for taxes, rent, and cheap beer. So total value is all pre-tax.

Thursday, July 03, 2008

NY Times: Hoarding Nations Drive Food Costs Even Higher

According to a recent NY Times article, at least 29 nations have recently curbed food exports.

Take a wild guess what happens when nations curb exports of something - I'll give you a hint, it's not bearish for prices.

Also this quote struck me in the article:
“The main cause of rising rice prices is the rising cost of rice planting,” said Surapong Suebwonglee, the finance minister of Thailand, the world’s largest rice exporter.

No more cheap energy means no more cheap food.

Money Morning: 3 Ways to Profit From Record Meat/Dairy Prices

Full article

Wednesday, July 02, 2008

Cotton Acreage Hits Lowest Level in 25 Years

Farmers continue to shift acreage to corn and soybeans.

One industry executive estimates cotton would need to top $1/pound for it to be cost competitive with corn and soybeans.

So we can do the math - either cotton is going higher, or corn and soybeans are heading lower, but something has to give.

Jim Rogers: Avoid Dollar At All Costs

Recent comments from our hero, the Sage of Commodities.

  • Avoid the dollar
  • Best investments for '08: commodities and natural resources
  • Don't give up on Chinese shares yet

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