Jim Rogers: Gold Will Top $2,000; Bernanke Should Resign; Buy Coffee

Our hero Jim Rogers has been back in the news quite a bit recently - here's his latest thoughts:

• He sees gold heading north of $2,000 in the next decade

• Ben Bernanke should (still) close the Federal Reserve, then resign

• He likes the Japanese Yen best at the moment of the currencies, but wouldn't buy it just now

Even if deflation does win the day in the near term, it does seem like gold is destined for $2,000 before this secular commodity bull market is over. If you're an investor, the best thing to do is probably to continue to accumulate gold, without worrying about the price.

As a trader, though, I'd be very cautious about gold in the short term. I think we're at a key inflection point in the inflation/deflation battle, and personally I'm wary that 2010 will usher in the return of DE-flation in a big way.

Further reading: Terry Coxon on when you can expect inflation to rear its ugly head.

Bank of Japans Ready to Intervene Against the Yen's Rise

Sean Hyman from World Currency Watch says watch out, the Bank of Japan is not one to be reckoned with. They are ready to intervene to stop the Yen's rise - and you don't want to test them.

And our pal and trusted currency advisor, Chuck Butler at the Daily Pfennig, agrees with Sean in his letter today:

And... While I don't want to spend the whole letter today on Japan... I must say that I think we should all be very wary of the BOJ and their history of intervening to keep yen weak. This will be a huge battle between the Carry Trade unwinders and Uridashi Bond sellers VS the BOJ... Just don't get caught up in it... If it happens, stay to the sidelines, you don't want to get caught up in an intervention battle...

Japanese Stocks Hit 26-Year Low

Japanese stocks have hit their lowest point since 1982, Agora Financial points out with this fine illustration:

Why the Yen and Dollar are Rallying

Here's the best explanation I've read yet - courtesy of Everbank's Chris Gaffney - in today's Daily Pfennig:

These investors had to sell some of their higher yielding assets to make up for the losses, and a move toward deleveraging started to emerge. As these first investors sold these assets, their price dropped, forcing still others to sell. The credit crisis, and the lockup of the credit markets was a final straw in the leveraged carry trades. Even investors who wanted to stay in the trades could no longer get the loans to keep these trades alive. They were forced to deleverage, selling their investments to pay back the loans.

So the benefactors of this deleveraging of the financial system? The Japanese yen and the US$, currencies which were used to funds these carry trades. The US and Japan have some of the worlds largest banks, and extremely low interest rates making them the perfect funding currencies for the carry trades. As the deleveraging has occurred, investors have purchased back these currencies to pay back loans.

Read the rest of Chris' excellent explanation here.

My Current Commodity Futures Positions - 10/12/08

Top posts from the past week:

• Quick Thoughts on the (Very) Latest Black Monday
• AuEx Ventures: An Intriguing Gold Junior Opportunity
• Sequoia Capital: RIP Good Times
• Jim Rogers on CNBC and Bloomberg - 10/10/08
  

A review of my trades from the week that was:

• Closed out my Japanese Yen position - Closed out on the Monday spike up. The Yen went a bit higher during the week, all the way to the 98 handle - looks like it's trading down in the Asian markets right now, slightly above "parity".

• Went long another Mini-Gold contract, and got stopped out of both contracts on Friday.

• Ditto for silver - went long a Mini contract on Thursday, got stopped out (and lost my shirt) on Friday. Maybe I need to chill on gold/silver for right now - I keep waiting for both to explode, but maybe they won't do so until all of this extra cash is really flowing through the system.
  

Other existing positions I've got:

• Short the British Pound - Just initiated this position on Thursday - maybe I shouldn't have. We'll see. Maybe I should pair up this trade with the Swiss Franc. Long the Swissie, short the BP - I like the sound of that. I'm scared to be long or short the dollar right now - it's too crazy.
  

My wish list (waiting for an uptrend...and we could be waiting for awhile):

• Sugar
• Cotton
• Coffee
  
• Natural Gas
  
• Silver

Also waiting for a downtrend in long term US Treasuries - we might have that soon.

Open Positions

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
10/10/08	Short	1	DEC 08	British Pound	1.6870	1.7123	($1,581.25)
Net Profit/Loss On Open Positions:							($1,581.25)

Account Balances
Current Cash Balance	$52,042.60
Open Trade Equity	($1,581.25)
Total Equity	$50,461.35
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$50,461.35

Cashed out: $20,000.00
Total value: $70,461.35

Weekly return: -4.4%
YTD return: -8.4%

***"Cash out" mostly means taxes, but lately I've also been using it for living expenses, and also to finance a time management software startup I'm working on.

My Current Commodity Futures Positions - 10/05/08

Top posts from the past week:

• Financial Times: Wealthy Investors Demanding Unprecedented Amounts of Physical Gold
• Jim Rogers on CNBC 10/1/08
• Quick Thoughts on the Latest Black Monday
  

A review of my trades from the week that was:

• Closed out my Swiss Franc position - Yikes - this trade did not work out, I got hammered big-time. The Swissie was up big on Black Monday as the carry trade unwound...but probably not as big as it should have been. That should have been a cue for me to get out, but I hung in until around the 0.90 mark and got out.
  

Other existing positions I've got:

• Long the Japanese Yen - The Yen was way up early in the week as the carry trade was unwound in a big way on Black Monday. Then it came back down to Earth - but all in all, another impressive week in the face of continued (surprising?) strength from the US dollar.
  

• Long Gold - Very tough week for gold, but as we've discussed in this space before, I believe the government's printing of money as fast as it can will send the price of Gold and Silver higher. And not to sound like too much of a broken record here - but how long can spot prices stay low, when you can't buy the physical stuff?

• Short Soybeans - Soybean futures broke down in a big way this week. I plan to stay the course as a short.
  

• Short 10-Year Treasuries - I am quite bearish on long-dated US Treasuries. I think interest rates have to rise, and rise significantly, as I can't imagine the world will continue to lend the US government money at these bargain basement rates. Anyone care to finance a $700 billion bailout plan, by the way?
  

My wish list (waiting for an uptrend...and we could be waiting for awhile):

• Sugar
• Cotton
• Coffee
  
• Natural Gas
  
• Silver

Open Positions

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
09/04/08	Long	1	DEC 08	Japanese Yen	0.9340	0.9553	$2,662.50
09/24/08	Short	1	MAR 09	T-Note (10yr)	113-245	114-315	($1,218.75)
09/17/08	Long	1	DEC 08	Mini Gold	864.6	839.0	($849.92)
09/09/08	Short	1	NOV 08	Mini Soybeans	1168 1/4	989	$1,792.50
Net Profit/Loss On Open Positions:							$2,386.33

Account Balances
Current Cash Balance	$50,397.12
Open Trade Equity	$2,386.33
Total Equity	$52,783.45
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$52,783.45

Cashed out: $20,000.00
Total value: $72,783.45

Weekly return: -6.0%
YTD return: -5.2%

***"Cash out" mostly means taxes, but lately I've also been using it for living expenses, and also to finance a software startup I'm working on.

My Current Commodity Futures Positions - 9/28/08

Top posts from the past week:

• Five Easy Ways You Can Diversify Away From the Dollar
• US Mint: Sorry, we're out of gold (again)
• Jim Rogers: Bailout is "welfare for the rich"
  

A review of my trades from the week that was:

• Went long the Swiss Franc - The Swissie is the Yen's carry trade cousin - they usually rise and fall in unison. The Swiss Franc is one of the world's sounder currencies, and I expect the carry trade will continue to unwind.
  

• Also shorted 10-Year Treasuries - As discussed earlier in the week, I am quite bearish on long-dated US Treasuries. I think interest rates have to rise, and rise significantly, as I can't imagine the world will continue to lend the US government money at these bargain basement rates.
  

Other existing positions I've got:

• Long the Japanese Yen - Not much action this week in the Yen.
  

• Long Gold - As we've discussed in this space before, I believe the government's printing of money as fast as it can will send the price of Gold and Silver higher.

• Short Soybeans - Nothing too exciting here, the trend still appears to be down. If the harvest is good, there will be a glut of soybeans on the market.

My wish list (waiting for an uptrend):

• Sugar
• Cotton
• Coffee
  
• Natural Gas
  
• Silver

Open Positions

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
09/04/08	Long	1	DEC 08	Japanese Yen	0.9340	0.9503	$2,037.50
09/22/08	Long	1	DEC 08	Swiss Franc	0.931700	0.9212	($1,312.50)
09/24/08	Short	1	MAR 09	T-Note (10yr)	113-245	113-225	$62.50
09/17/08	Long	1	DEC 08	Mini Gold	864.6	892.2	$916.32
09/09/08	Short	1	NOV 08	Mini Soybeans	1168 1/4	1167	$12.50
Net Profit/Loss On Open Positions:							$1,716.32

Account Balances
Current Cash Balance	$54,458.17
Open Trade Equity	$1,716.32
Total Equity	$56,174.49
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$56,174.49

Cashed out: $20,000.00
Total value: $76,174.49

Weekly return: 0.2%
YTD return: -0.4%

***"Cash out" mostly means taxes, but lately I've also been using it to pay down my credit cards a bit. Why credit card debt? I'm financing a startup and trying to outpace my CC interest rate in the futures markets - kids, don't try this at home.

My Current Commodity Futures Positions - 9/21/08

A review of my trades from the week that was:

• Went long December Gold - I picked up a gold contract on the big breakout this week. As we've discussed in this space before, I believe the government's printing of money as fast as it can will send the price of Gold and Silver higher.
  

Other existing positions I've got:

• Long the Japanese Yen - This trade was looking fan-freaking-tastic mid-week, as the Yen was flirting with 0.97. Then the latest example of US socialism sent the Yen reeling, as the good times returned again on Wall St, and the carry trade was back on. Let's see how long this latest disregard for risk holds true.
  

• Short Soybeans - Nothing too exciting here, the trend still appears to be down. If the harvest is good, there will be a glut of soybeans on the market.
  

My wish list (waiting for an uptrend):

• Sugar
• Cotton
• Coffee
  
• Swiss Franc
• Natural Gas
  
• Silver

Open Positions

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
09/04/08	Long	1	DEC 08	Japanese Yen	0.9340	0.9431	$1,137.50
09/17/08	Long	1	DEC 08	Mini Gold	864.6	876.4	$391.76
09/09/08	Short	1	NOV 08	Mini Soybeans	1168 1/4	1161 1/2	$67.50
Net Profit/Loss On Open Positions:							$1,596.76

Account Balances
Current Cash Balance	$54,480.27
Open Trade Equity	$1,596.76
Total Equity	$56,077.03
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$56,077.03

Cashed out: $20,000.00
Total value: $76,077.03

Weekly return: 0.6%
YTD return: -0.6%

***"Cash out" mostly means taxes, but lately I've also been using it to pay down my credit cards a bit. Why credit card debt? I'm financing a startup and trying to outpace my CC interest rate in the futures markets - kids, don't try this at home.

Deflation Everywhere You Turn, Get Comfortable

My morning glance at the Futures screens revealed that, well, just about everything is down across the board. Of special note:

• Cotton flirting with the 60-cent handle (wow, that looks cheap)
• Silver getting kicked in the teeth again
• Oil off big again, flirting with $90

Not to mention global stock markets getting slammed across the board.

In fact the lone positions weathering this storm appear to be our old friend, the Japanese Yen, and US Treasuries - both due to this flight to "safety".

Maybe "perceived safety" in the case of Treasuries - is it really safe to lock in a long-term yield that is below the rate of inflation, to a heavy debtor with an awful balance sheet?

I'm playing this mostly from the sidelines. I've got my long Japanese Yen position, which is performing nicely. While adding another contract may be the trade to make, I'd like to see how the rest of the week goes at the very least. I don't like buying the Yen, and the Swiss Franc for that matter, on these spikes, as I've seen them give back these gains before.

Also have my short Soybeans contract - which looks like it wants to bust through that lower level of resistance.

All in all, we may need to hold tight on the commodity front until the global economy gets through this soft spot. My suggestion would be to get comfortable. When the global economy reheats, we will have some fantastic buying opportunities.

My Current Commodity Futures Positions - 9/14/08

A special Blogging the Commodity Bull Market shout out to my good friend Lance, who works at a prominent New York investment bank.

Lance (name altered to protect the innocent) is a regular reader of our blog, though he is strictly forbidden from commenting whatsoever due to his professional ties.

Via a text message exchange we had today during the late NFL games, Lance provided me with some key insider info: "hope ur long oil pal! dump the dollar". Lance went on to recommned that I "buy the norwegian krona".

Though these text messages no doubt were sent after a beer or ten, we give a hearty salute to Lance. And armed with his information and insights, I have indeed covered my short British Pound position, preparing for the next flush of the dollar down the porcelain bowl.


A review of my trades from the week that was:

• Closed out my short British Pound position - twice - I closed out my two short BP positions last Sunday night when the dollar rally looked over. Then the dollar surprisingly bounced back, and I shorted the BP again - and then covered again tonight, after watching it pop up nearly 5 cents since Friday. Both the BP and the Dollar are flawed currencies circling the bowl - the question is, which will circle towards the bottom faster.
  

• Shorted Soybeans - Beans look like they may want to break down. My research is telling me that a good harvest will put plenty of beans on the market. I'll quickly exit if beans rally on bullish harvest news.

Other existing positions I've got:

• Long the Japanese Yen - So far, so good.
  

My wish list (waiting for an uptrend):

• Sugar
• Cotton
• Coffee
  
• Swiss Franc
• Natural Gas
  
• Silver

Open Positions

Date	Position	Qty	Month/Yr	Contract	Entry Price	Last Price	Profit/Loss
09/04/08	Long	1	DEC 08	Japanese Yen	0.9340	0.9455	$1,437.50
09/09/08	Short	1	NOV 08	Mini Soybeans	1168 1/4	1189	($207.50)
Net Profit/Loss On Open Positions:							$1,230.00

Account Balances
Current Cash Balance	$54,504.37
Open Trade Equity	$1,230.00
Total Equity	$55,734.37
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$55,734.37

Cashed out: $20,000.00
Total value: $75,734.37

Weekly return: -7.2%
YTD return: -1.1%

***"Cash out" mostly means taxes, but lately I've also been using it to pay down my credit cards a bit. Why credit card debt? I'm financing a startup and trying to outpace my CC interest rate in the futures markets - kids, don't try this at home.

Chuck Butler: Why the Yen is Still Holding Strong

From today's Daily Pfennig:

I'll tell you why I believe this is happening... So many Japanese investors held Aussie and kiwi (the high yielders) VS their base currency (yen)... And when Commodities started their free fall, these Japanese investors began to close out those positions, which meant they sold Aussie and kiwi, and bought yen...

Even the most recent Belle of the Ball, Brazilian real, has gotten caught up in the Commodities free fall... The real is the weakest it has been in several months this morning... And the other runner up Belle of the Ball, Mexican pesos, have gotten the snot knocked out of it by this dollar move...

So... Japanese yen, is the lone wolf bucking the dollar's rally.

Commodity Market Thoughts

• Cattle's looking good - I'm keeping an eye on the Feeder market also. Wish I still had all my Live Cattle contracts, but oh well - looking to add on a new breakout.

• Pork bellies are not looking good - same article linked above mentions too much supply on the market.

• Quite a breakout by gold and silver over the past few days. Silver looks particularly intriguing, as it has a compelling supply/demand story also. I believe both are sitting right around their 50-day moving averages.

• All the commodity currencies are rallying quite strong. Will be interesting to see if the Aussie dollar can stay strong if the market turns down. I personally think there will be some short term panic selling, which will also drive the Japanese Yen and the Swiss Franc up.

• Sugar, as our buddy Toby said once, is acting like a giant turd. Too much supply on the market, it appears. Long term it's going much higher - until then, probably best to wait.

• Coffee is looking strong also. I'm going to sit back and wait on this one - coffee head fakes more often than #24.
  

Futures traders going long US Dollar

Chuck Butler mentioned yesterday in the Daily Pfennig that, for the first time since 2005, Futures Traders are going long the US Dollar. 2005, you'll remember, was the year of the dollar's counter rally in this downtrend.

Nothing goes straight up or down, so we'll see if this is the start of some sort of dead cat bounce for the US dollar. Be careful and consider this when making your trades.

I should follow some of my own advice - I snuck back into the Japanese Yen Sunday night, and snuck back out Monday morning, taking my usual haircut on the Yen. It's getting to be a bit of a joke, even around here, as I was walking around the house cursing the Yen - even my wife yelled at me "Stop trading the Yen, all you do is lose money! Stick to commodities!"

Kevin Kerr: The Food Crisis, A First-Hand Report

Same story we've been following here. A nice rally in the grains today, and a little bit of life in the softs as well.

Can corn continue to break out from here? It's been rangebound for the past couple of months - I keep thinking that fundamentals will eventually prevail and push corn past the $7 mark.

In a "close your eyes and buy" trade, I picked up a mini Nat Gas contract this morning. I've been itching to buy it since it crossed the $8 mark, but lacked the testicular fortitude. I hate the volatility of Nat Gas, but no doubt which way the trend is going.

Also keeping a close eye on the Yen and Swiss Franc here. Both appear cheap, but could head lower as long as the "good times" remain on Wall St. When the next leg of the bear market hits, I expect these two to shoot up.

Dollar, Carry Trade Thoughts from Chuck Butler

A couple of good ones from Chuck in today's Daily Pfennig:

Well... How about that U.S. dollar? That's some currency Rudy! Why, look at it rallying against the euro and other currencies as if it's on a mission from God! It looks as if the U.S. has turned things around... The Deficit no longer needs to be financed with over $2 Billion a day in foreign investment... Interest rates are where they need to be to fight this soaring inflation... The Government has stopped spending wildly, and the Budget is balanced... The mortgage lenders have recovered all of their losses... There is no longer a credit crunch... And finally, the war is the Middle East is over...

But Wait! Unless I pulled a Rip Van Winkle and slept through all of that... These things haven't happened, nor do they look as though they might begin to happen any time soon! So, what the heck has the dollar bulls dancing in the streets swinging a mighty hammer?

And on the carry trades:

The U.S. stock market has been on a feeding frenzy since the rate cut on Wednesday... All this euphoria in stocks has the Carry Trade going great guns once again... This is being reflected in the price of yen and Swiss francs... I just don't see how this can continue to go on and on and on... The Carry Trade has longer lasting power than the Energizer Bunny! But one day, it will all come crashing down like a house of cards... At least that's my opinion...

FT.com: Is the Yen still a Japense Currency?

David Bloom makes the case that the Japanese Yen is no longer trading based on Japanese events.

From personal observation - I agree, the Yen has been basically an inverse proxy of risk appetite in America for the past year or so.

Daily Pfennig: Blue Light Specials on Yen, Swiss Franc

Currency guru Chuck Butler at the Daily Pfennig has been waiving the flag for the Swissie and Yen for some time, long before their recent moves up.

He loves them at today's prices:

Swiss francs are back to parity with the dollar, and even beyond! Japanese yen is flirting with a sub-100 figure too! I believe the term, "blue light specials" was used by someone (me!) a couple of weeks ago describing the cheaper levels to buy these currencies... I love it when a plan comes together!

Times Online: Dollar tumble spells trouble for yen trade

Full article

Summary:

• We all know the yen carry trade - folks borrow "cheap" yen (paying unnaturally low interest rates), invest in higher yielding terrain (ie. Australian dollar) and leverage the shit out of it.
• This doesn't work when the yen rises - as it is now. I had assumed that most of the carry trade was "unwound" - but this article suggests the real fireworks could be ahead of us.
  

Daily Pfennig: Yen Rally May Pause

From Chris Gaffney at the Daily Pfennig:

Both Chuck and I have had positions in Japanese Yen for some time now, so you will have to excuse us if we seem a little excited (relieved) that the yen is finally moving up. But as always, the move in yen won't be a one way ride. News released last night could put an end to this recent rally as there is the makings of a political standoff in Japan. Japan's main opposition party said it will reject Prime Minister Fukuda's candidate to lead the central bank only a week before the current governor's term expires. This may lead to the central bank's top post becoming vacant, but is that really so bad? I can think of a few central bank heads which we would probably be better without!!

Both the Yen and the Swiss Franc were acting funny, down quite a bit in the last 24 hours - enough for me to take off my positions in both for the time being. I think this run may be over for now.

On the bright side, grains are rallying and rice is looking good again, with a new breakout after last week's sharp correction.

Jeremy Grantham Interview in Barron's

An interesting interview with superinvestor Jeremy Grantham.

Perhaps of interest to readers of this blog: he mentions he is long the Japanese yen, the Swiss franc, and the Singapore dollar.