Dennis Gartman Video: Oil Prices Could Drop Below $80

Full video of Dennis Gartman on CNBC

• Thinks oil will drop to $80-90 range
• He's not crazy enough to try and short the market
• Believes oil's bull run will be on ice for the next couple of years
• Is short Toyota and long Harley Davidson - believes people will downsize their transportation (not sure if I follow that theme)
  

Worst Month for Commodities Since 1980

If you, like me, are wondering where you've gone wrong in your trading over the past couple of months - we can take some minor solace in this fact.

The CRB commodity benchmark index fell over 10% in July, marking the worst month for the index since 1980 (which, incidentally, marked the end of the last bull market).

While I believe we are only in the 4th or 5th inning of this bull market, a couple lessons come to mind:

• The easy money has been made - buying oil at $12 was a no brainer. Buying oil at $120 could burn you in the short-medium term.
• All bull markets have pull backs. Commodities took off out of the gates to begin the year, but many have since retraced and given back most or all of their gains. This has been reflected in my trading performance (up an easy 100%, then giving most of those gains back since).

Bottom line, make your shopping list now, and go easy on the leverage. Nobody wants to be leveraged to the hilt during a correction, but it's tough to know when the next leg up will come - I prefer to have a skin in the game at all times.

My favorites right now: sugar, coffee, cotton, live cattle, lean hogs. Currently still long sugar, cotton, and live cattle.

Current Commodity Futures Positions - 8/03/08

Will post some thoughts later in the week on the positions...

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 0.9280 ($2,870.00) 06/17/08 Long 1 DEC 08 Cotton 82.20 70.72 ($5,740.00) 07/30/08 Long 1 FEB 09 Live Cattle 108.850 110.225 $550.00 08/01/08 Long 1 FEB 09 Live Cattle 110.700 110.225 ($190.00) 07/29/08 Long 1 OCT 08 Sugar #11 12.84 13.78 $1,052.80 07/31/08 Long 1 OCT 08 Sugar #11 13.91 13.78 ($145.60) 07/31/08 Long 1 SEP 08 Swiss Franc 0.954900 0.9574 $312.50 Net Profit/Loss On Open Positions: ($7,030.30)

Account Balances
Current Cash Balance	$81,107.68
Open Trade Equity	($7,030.30)
Total Equity	$74,077.38
Long Option Value	$0.00
Short Option Value	$0.00
Net Liquidating Value	$74,077.38

Cashed out: $15,000.00
Total value: $89,077.38

Weekly return: -3.8%
YTD return: 12.9%

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

The Every Increasing March of Oil Prices

Kevin Kerr gives CNBC his thoughts on the oil market.

Kevin makes a great point - demand destruction is overblown, as it took $140 oil for to trigger a measly 2.5% drop in US demand. A drop in the global bucket, he says.

He sees oil back up towards $150 by years end.

I agree - until we see new supply coming online, the trend of oil will be inexorably upwards. And since we're not discovering any new elephant oil patches, that supply will have to come in the form of alternative energy - which is quite a ways off today, especially when we're talking about transport energy.

Remember, solar and wind energy are great, but they are not going to power your car, or an airplane. That's oil and nat gas for now and the foreseeable future.

For a great article on this subject, check out David Galland's article on the export land model, and what it means for energy prices.

Side note - David writes for Casey Research, a publication I am a very satisfied subscriber of. In fact, local Casey Research subscribers have begun gathering recently here in the Sacramento area to discuss the global economic situation and investing on a monthly basis. Let me know if you're in the area and would like more info about this.

Rick Rule on the Metals Markets

Rick Rule, if you're not familiar with him, is a legendary metals and mining investor. In this interview with Gold Report, he gives his thoughts on the disconnect between metal equities and the metals themselves, along with his outlook for the US dollar and metals.

A quick teaser/summary:

• Believes the disparity between gold stocks and gold prices will continue, as the margins of gold miners have been squeezed significantly. Profits are not where you'd think they would be, given that gold is up from $300 to $900.
• Sees a continued softening in the US dollar over the next few years, as the bad economic news from the US will continue to mount.
• As a result, he sees gold and silver moving higher in dollar terms.