Tuesday, June 30, 2009
Feel free to comment on my music choices!
1. Never, under any circumstance add to a losing position…. ever! Nothing more need be said; to do otherwise will eventually and absolutely lead to ruin!
2. Trade like a mercenary guerrilla. We must fight on the winning side and be willing to change sides readily when one side has gained the upper hand.
3. Capital comes in two varieties: Mental and that which is in your pocket or account. Of the two types of capital, the mental is the more important and expensive of the two. Holding to losing positions costs measurable sums of actual capital, but it costs immeasurable sums of mental capital.
4. The objective is not to buy low and sell high, but to buy high and to sell higher. We can never know what price is “low.” Nor can we know what price is “high.” Always remember that sugar once fell from $1.25/lb to 2 cent/lb and seemed “cheap” many times along the way.
5. In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many.
6. “Markets can remain illogical longer than you or I can remain solvent,” according to our good friend, Dr. A. Gary Shilling. Illogic often reigns and markets are enormously inefficient despite what the academics believe.
7. Sell markets that show the greatest weakness, and buy those that show the greatest strength. Metaphorically, when bearish, throw your rocks into the wettest paper sack, for they break most readily. In bull markets, we need to ride upon the strongest winds… they shall carry us higher than shall lesser ones.
8. Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect “gaps” in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
9. Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In “good times,” even errors are profitable; in “bad times” even the most well researched trades go awry. This is the nature of trading; accept it.
10. To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.
11. Respect “outside reversals” after extended bull or bear runs. Reversal days on the charts signal the final exhaustion of the bullish or bearish forces that drove the market previously. Respect them, and respect even more “weekly” and “monthly,” reversals.
12. Keep your technical systems simple. Complicated systems breed confusion; simplicity breeds elegance.
13. Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen… just as we are about to give up hope that they shall not.
14. An understanding of mass psychology is often more important than an understanding of economics. Markets are driven by human beings making human errors and also making super-human insights.
15. Establish initial positions on strength in bull markets and on weakness in bear markets. The first “addition” should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
16. Bear markets are more violent than are bull markets and so also are their retracements.
17. Be patient with winning trades; be enormously impatient with losing trades. Remember it is quite possible to make large sums trading/investing if we are “right” only 30% of the time, as long as our losses are small and our profits are large.
18. The market is the sum total of the wisdom … and the ignorance…of all of those who deal in it; and we dare not argue with the market’s wisdom. If we learn nothing more than this we’ve learned much indeed.
19. Do more of that which is working and less of that which is not: If a market is strong, buy more; if a market is weak, sell more. New highs are to be bought; new lows sold.
20. The hard trade is the right trade: If it is easy to sell, don’t; and if it is easy to buy, don’t. Do the trade that is hard to do and that which the crowd finds objectionable. Peter Steidelmeyer taught us this twenty five years ago and it holds truer now than then.
21. There is never one cockroach! This is the “winning” new rule submitted by our friend, Tom Powell.
22. All rules are meant to be broken: The trick is knowing when… and how infrequently this rule may be invoked!
DGW broke through recent IPO highs today and then had a cliff dive into the close in some weird action in the final minutes. Nevertheless, there is often a lot of money that can be made buying the opening range (low to high prices in the early weeks of a hot IPO) breakout (when it breaks to an all time high). Not sure what to make of the final minutes of trading as it broke out then broke back down and then had a print 70 cents below the last trade I saw as the closing price. DGW could continue to see momo (momentum) money jump on as it only has a 5 million share float with China water sex appeal to boot.
Again, this is more of a momentum play than a current fundamental play - so set stops accordingly. However, CYOU is a recent China IPO that caught momo fever.
2. What would you like to hear more / less about?
3. What will help get this blog a wider viewing audience (although yesterday was the highest day as far as visits / views go so I know some people are catching on)?
I want to publish content that you folks actually want to read. Help me make this blog better - Please leave your comments. They are appreciated.
Some other stocks of note in my book: The TBT swing long getting some traction here this morning. DGW above $24 resistance but volume not yet convincing me, but it could get loose and that's what I am in it. UNG as mentioned pre-market taking a hit although off the pre-market lows but $14 which was support now looks to be resistance in the early AM.
Update: Took a long in the SDS (2x short the S&P 500) at 54.26, tight stop under lows of the day under $54. Update: Took 1/3 off on the quick 50 cent pop.. stop moved to entry. Update: selling another 1/3 more for $1.2 gain. Update 12:13 - final piece off here for $1.5 as I could see a scenario where they rally us back into the end of the day.
10:53: I may make some positions changes or hedges in my longer term plays later today depending on the action the rest of the day - lots of commodity weakness today. Precious metals not really acting as safety plays today.
Is today's pre-market action a good place to buy the dip in UNG or are we set to head to new lows?
Monday, June 29, 2009
Here's how I play it:
Let's say I have conviction in a Trade. Remember I am talking about a trade (I define a trade as something with a time frame from one day to 4 weeks) not a longer term investment. I will discuss some of my rules I use for longer term investing in another post some time.
So again let's say I have a conviction trade and it goes against me the first time I put it on and I get stopped out. This will probably make me frustrated and think I should put it right back on the next time I like the action in that idea. I allow myself to put the trade back on ONE more time. If it hits my stop again I put myself in the penalty box for trading that security for two weeks. It's just my rule and two weeks is somewhat arbitrary, but for me it's enough time to let my "anger" release and not trade with fury against the market by going in again and again in the same idea that keep going against me. Because if you let yourself keep going after the same trade again and again and you believe in it but it keeps going against you, you may start doing crazy stuff like putting on more size to get even with Mr. Market. While occasionally you will catch it right and make your money back, more times than not you will get chopped out again as with bigger size your stop will likely be a lot tighter and likely to get hit and the the cycle could start again until you end up looking at your balance at the end of the trading day saying, "I am an f-ing idiot!". The thing is you would be right.
I know that this penalty box rule has saved me a lot of money since I implemented it. I use to have a hard time letting go of a conviction trade I had. This led to losses I should have never taken, but did because I wanted to prove to the market I was right. That attitude will cause you to take huge equity draw downs that will shake your confidence unnecessarily. Go into the penalty box because watching the trade go the way you thought after you're in the box is a lot better feeling than getting out of control with you emotions and losing both dollar capital and mental and emotional capital.
Simple definition though from Investopedia:
Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.
Another variation of window dressing is investing in stocks that don't meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund's holdings, so clients really have no idea what they are paying for.
Window dressing may make a fund appear more attractive, but you can't hide poor performance for long.
Update on current positions of note: TBT swing long trying to stay above my stop slightly under 50. I can see TBT being a max frustration trade for me and knocking the stops out under 50 and then heading back north immediately - but we'll see.
DGW up early but that thing is volatile so doesn't mean a whole lot - would like to see a strong close there. Seems like $24 is pretty stiff resistance right now.
Sunday, June 28, 2009
Saturday, June 27, 2009
Friday, June 26, 2009
"The U.S. is faced with the choice of either paring back its budget deficits and monetary base as soon as the current risks of deflation dissipate, or setting the stage for a potential upsurge in inflation."
Actually some intelligent stuff in here.
Other Market Commentary - I will probably be pretty quiet the rest of the day trading as this is pretty whippy action with lower volume (a summer Friday atmosphere).
Again, over the longer term I see the American lifestyle getting worse as the dollar weakens and begins losing its monopoly as the reserve currency.
Thursday, June 25, 2009
You do not need to be right the majority of the time when trading. You just need to be make more money on the (few) trades when you are right than the (many) trades that you will be wrong. As a a trader accept being wrong - but limit your losses and then when you are right it will more than cancel out your wrongs!
Wordy way to say cut your losers quicker than your winners. That's easy to say but harder to actually do when you have trades on - trust me... but you know it.
So is the indirect participation in the UST auctions as good as it looks?
Good for over a 15% gain from the lows this morning (i didn't buy at the exact lows though). This one has momo written all over it. This is why if you want to follow my calls you must check the site regularly throughout the day. I mean why not - the site is free?
Let me know if you like or dislike the small cap discussion on this more macro blog.
Here is a DGW summary from briefing.com
Chinese water treatment equipment supplier Duoyuan Global Water (DGW) prices its IPO at $16 per ADS, above the high end of its expected $13-15 range. Each ADS represents two ordinary shares. Its products focus on addressing the key steps in the water treatment process, such as filtration, water softening, water-sediment separation, aeration, disinfection and reverse osmosis. Co believes its nationwide distribution network is one of the largest among water treatment equipment suppliers in China. This extensive network allows it to be closer to its end-user customers and more responsive to local market demand than many of its competitors. Customers include wastewater treatment plants, water works facilities, manufacturing plants, commercial businesses, residential communities and individual customers. The co continually broadens its market reach by introducing new products that help it diversify its revenue base... Due to urbanization and industrialization in China, China faces severe water shortage and natural water resource pollution. To address those issues, the Chinese govt has enacted stricter environmental standards and invested significantly in water treatment projects. Accordingly, the demand for water treatment equipment has been experiencing rapid growth... The company is profitable and growing quickly with 2008 revenue of US$86.7 mln, up 40%, and Q1 revenue rose 39% yr/yr to US$17.7 mln. The co is high profitable with Q1 operating margin of about 33%... Briefing Note: Just like CPC earlier today, DGW is the latest in a string of Chinese IPO's that have priced well, including CYOU on Apr 2. Water contamination is a big problem in China and DGW looks like an interesting small cap, highly profitable play on the trend to improve environmental conditions in China and it's a play on the burgeoning middle class in China. It seems Chinese IPO's are becoming higher quality as underwriters understand that investors are being more selective in bidding up new issues. This is a 5 mln ADS deal, led by Piper, OpCo and Janney Montgomery.
As I look at it further it certainly isn't priced cheap at these levels, but if you assume higher growth rates you can justify it. That said, the 5 million float and sexiness of China / Water treatment could get the momo sharks circling this IPO for a bid up to $30. Also, Jim Rogers has been hammering that he thinks Chinese water treatment companies are a great place to invest. This is not like my other macro picks which are fundamentally based this is more of momentum (momo) play. So therein lies extra risk. Personally, I have moved the stop on all my shares up to my entry so I can't lose money on this trade ($21.65 is my average entry).
Still long a good size UNG position though so I can't get too upset. Still, if you are a trader you know the feeling of being right and not taking advantage of it which is what I have been doing the last few days. The plays I take are scratching and the plays I like but don't take are moving! The life of a trader, right?
Don't mention the OIH as it is up another $3 today (I would have been a seller between 99/100 though if I had bought). I previously noted my misplay on this ETF as I was planning to own it into the quarter end just for this reason.
Going to take a daytrade small long in the SDS (2x short S&P 500) here at 55.62 stop about 60 cents below at 54.99, just playing the odds that we come back in before the end of the day. Update: Taking the 35 cent gain here at 3:45 on this daytrade.
Also, don't talk much about smaller caps here as I will probably start another blog for that (and keep this one more macro focused), but did take a new long in DGW - Duoyuan Global Water Inc. (IPO'ed yesterday, China water filtration play, small float. Valuation here only OK, but potential is huge and momo traders could jump on it). Bought at average price today and yesterday of 21.65 stop under 20 on this one.
Update from previous days - stopped out the rest of my TBT on this move up in bonds (still own my core short in TLT). Ended up with about a scratch from the profitable piece I took yesterday and the stop out price on the rest. Today people are seeking the safety of stocks, bond, commodities? what? just buying stuff - I guess. Certainly feels like window dressing into quarter end to me. Still, should have played it better as this up move is not completely unexpected for me so should have had some more longs in sectors I like to offset my short market exposure.
Check back multiple times a day because I will post all my new positions in real time (even the small caps) - also, you need to revisit the posts where I make the initial call (during the trading day) because I may update my positions later with an update post inside of the original post that day. If I hold the position more than one day I will make a new post to indicate if I have exited the position or changed the stop.
This is from Gains and Pains Capital and is an interesting read - note the link to another article at the bottom.
Ladies and Gentleman, I present to you America’s Financial Branch of the Government: Goldman Sachs.
Trying to detail exactly how integrated Goldman has become to the Federal Government would be like trying to track the peanut butter swirls in Ben and Jerry’s Chocolate Peanut Butter Swirl ice cream. Indeed, with the exception of Ben Bernanke and a few other officials, Goldman Sachs provided all the lead characters for the Tragic Comedy that is our latest Financial Crisis.
Central to the entire mess is Hank “the Hammer” Paulson, our former Public Money Privatizer or Secretary of the Treasury as he is commonly known. To chronicle the full intricacy of Paulson’s web of cronies and the methods he used to funnel public funds to them and their business during the Crisis would require a book, not an essay.
However, one can draw a great deal of conclusions about Paulson’s central beliefs on business and politics by mentioning that one of his first positions of power was serving as assistant to John Erlichman, the central architect of Richard Nixon’s Watergate Scandal: a man who believed that when it came to wining seats of power, it’s best to break and enter, steal, and destroy one’s enemies at all costs.
Erlichman was convicted on conspiracy, obstruction of justice and perjury. Paulson went on to become CEO of Goldman Sachs.
Beyond Paulson, Goldman’s reach in this crisis is virtually unending. John Thain, former CEO of Merrill Lynch was a former Goldmanite. So was Robert Rubin, the Chairman of Citigroup. Then there’s Robert Steel, the head of Wachovia, Ed Liddy, who Paulson put in charge of the nationalized AIG, Mark Patterson, the current Treasury Chief of Staff, Neel Kashkari, the guy in charge of allocating TARP funds… heck, even Tim Geithner was mentored by the afore-mentioned Robert Rubin.
What’s staggering is that no one seems outraged by all of this. It’s not too difficult to connect the dots on what happened: a former Goldman exec was put in charge of allocating public funds to other former Goldman execs who in turn allocated the funds to their employees in the form of bonuses and enormous salaries. Indeed, it’s telling that Paulson’s original proposal for the $800 billion bailout entailed NO curtailing or oversight of executive compensation at the firm’s receiving our money.
I’m starting to run out of room here. But if you’re interested in these issues and learning more about Goldman Sach’s involvement in our Federal Government, I STRONGLY urge you to read Matt Taibbi’s recent expose on the firm in Rolling Stone magazine. Be forewarned, you will be infuriated by what Taibbi reveals. But if it gets people contacting their local representatives and Senators asking why we haven’t launched any investigations into Paulson’s allocation of public funds... That is, of course, assuming you can find a non-former Goldmanite to be in charge of the investigation.
You can see Taibbi’s article online at:
Wednesday, June 24, 2009
Gold doesn’t care if it’s inflation or deflation.
One of the central arguments for financial commentators right now is whether the US is currently facing inflation or deflation. Everyone (at least everyone with a functioning cortex) is aware that the US (and the rest of the world for that matter) will face more difficult times ahead. However, whether it will be an environment of increased inflation or increased deflation is up for debate.
Personally, I have been in the inflation camp for some time now. However, when it comes to investing, it never pays to grow complacent with one’s thinking. So I did some research into how gold performed during inflationary vs. deflationary periods. The results were rather shocking, to say the least.
According to Scott Reamer of Vicis Capital, gold and the dollar index has shown an inverse correlation of -.28 over the last 17 years. Now, a correlation of -1 would be a perfect inverse correlation, meaning that every move the dollar index made would be mirrored to the inverse by gold (the dollar falls 1, gold would rise 1).
As Reamer points out, a correlation of -.28 is not a strong correlation at all. So to claim that gold will spike if the dollar rolls over because the two are inversely related is overly simplistic. A far more reasonable assumption would be to say that should the dollar collapse, gold will rally due to safe haven seeking by investors.
Indeed, it is gold’s status as a safe haven of wealth (the ultimate currency if you will), NOT its inverse relationship to the dollar, that makes it so special. Gold has been the ultimate storehouse of wealth going back thousands of years. But what’s truly remarkable is that it has maintained this quality even during periods of DE-flation.
The ultimate text on this matter is Roy Jastram’s The Golden Constant. I don’t recommend looking for or reading this book because a) it’s out of print b) it’s a very dense read.
To summarize, Jastram performed a study of gold’s performance over a 416-year period in England’s history (from 1560 to 1976). He found that historically, gold has acted like a storehouse of value throughout wars, plagues, and the like. However, what’s most striking is that gold actually INCREASED its purchasing power during periods of DE-flation.
Deflationary Periods in England
Purchasing Power of Gold
This last point is absolutely extraordinary when you consider that the thought pattern “gold rises in inflation and falls during deflation” is one of the most commonly believed investing mantras out there. Indeed, gold has undergone a seismic shift in the last year, largely due to inflationary concerns.
Consider the following: Global gold demand jumped 38% in the 1Q09. Three years ago, demand for gold as an investment only comprised 10% of global gold demand. Today it’s over 30%. That’s an unbelievable increase in investment demand.
From an anecdotal standpoint, I’ve begun hearing numerous “we’ll pay cash for gold” radio advertisements. And just yesterday at the gym I saw G. Gordon Liddy on TV touting gold as king and the dollar as garbage (he actually crumpled a dollar bill up on camera). When a guy like Liddy (central architect of the Watergate break-in) becomes a spokesperson for distrusting the government, then you know the general public is growing anxious about the currency.
But my main point is this: Gold will perform well in ANY investment environment going forward, whether it’s inflation OR deflation.
If the dollar rolls over and tanks, gold will benefit greatly from a flight to safety or a desire to seek a non-fiat currency.
And as Jastram’s book shows, if deflation takes hold (as credit and household wealth contracts further) gold will ALSO perform well just as it did during numerous deflationary periods between 1560 and 1976.
How’s that for a win-win?
Reuters.com reports the top Republican on the House Oversight and Government Reform Committee said on Wednesday that the Federal Reserve sought to hide its extensive involvement in Bank of America Corp's (BAC) acquisition of Merrill Lynch as Merrill's financial condition worsened. "The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the 'shotgun wedding' that was the Merrill Lynch acquisition... The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," Representative Darrell Issa said in a statement released to Reuters. The committee has obtained a number of emails and documents from the Fed about its behind-the-scenes role in the merger, which was quickly brokered late in 2008, according to sources familiar with documents. The Fed, which was wrapping up a two-day meeting on Wednesday, had no immediate comment.
update: took 1/3 off of my TBT for 75 cents, stop on rest under 51.49
Also, from a techy perspective the GLD chart looks pretty good on this bounce off of $90. I will follow up with the charts later.
Oh well... missed opportunity because I would have probably taking 1/2 off at $1 profit and swung the rest with a stop at entry - but that's all theoretical now.
Morning update: OIH coming back now so that to some extent invalidates my thesis so I probably will just back away as I am a little confused as to how weak it is relative to the market. I generally don't do well trading relative weakness although I still long would be the way to go if trading it. And I should have bought the pullback - boy, I am confusing myself on this one and I haven't even entered a position!
Tuesday, June 23, 2009
"He told my source on Friday [June 12] that the U.S. government told Goldman Sachs on Thursday afternoon to take the price of gold down. Note the Thursday evening MIDAS (Murphy's) comments after gold closed at $960.70 during the Comex trading hours ..."
After market update - better finish for the precious metals than I thought might happen. TBT long looked good but came back in, although I am still holding for a swing into month end. Also, going to look at OIH for a possible long tomorrow.
A link to Bill Cara's thoughts HERE
Although it does seem gold is breaking down and the hedging of the commodities I mentioned yesterday (I bought some GLD puts) may have been wise for the short term. As despite the dollar being lower we still see lower prices in most all commodities so far today. This action will help the Fed state that inflation is under control this week I am sure. Also, for some reason people still buy US bonds when things look uglier for the US - which I understand in normal environments, but an uglier economy now means higher deficits, more bond issuances, and lower US tax revenue. I am starting to look at adding a long position in TBT (ultrashort long term treasuries for a swing).
11:30 update: I bot TBT at 51.9 - stop about 60 cents below
Monday, June 22, 2009
Click the following link: The Real Crisis is About to Unfold… and It’s Not Financial
You don't have to trade all the time to be a trader. Take it from someone who has overtraded in the past. Being flat is OK , not trading is OK - there is no minimum number of trades you have to make to be a trader and to use a poker analogy - "You can't lose what you don't put in the middle (of the pot)"
Save your trades for when you feel you have a "real" edge, not just when you need action... that's gambling, not trading.
Can the SEC investigate Geinther, Bernanke, and Obama for knowingly bantering false information? of course not.
Unfortunately for me - the gains I am taking in my short market positions are being overtaken by my short bond and long commodities exposure. Gold and the precious metals aren't even acting as a safe haven.
It seems the market moves everyday opposite of the dollar and with the commodities (even gold). Let's see how the action plays out as maybe we are just having an early morning shake especially in the precious metals and will finish stronger. However, maybe the powers that be know some info that the rest of us don't (like the IMF ready to dump gold onto the market about to be announced, etc.)
Also, as you know I am short the market so maybe we are getting another case of everything going down in unison other than US bonds (that type of action would be supportive of deflation / not inflation - so maybe the deflationists will be right short term although can't see that medium to longer term).
Sunday, June 21, 2009
This rant originates from my recent trip to a hotel where the internet was about as reliable as the advice from most peoples' stock brokers...
Saturday, June 20, 2009
Buy Gold to Keep Up with Inflation
Very Dangerous Time for the Dollar Index
John Burbank's Passport Capital adds Massive Gold Stake
Hyperinflation could hit the US in 5-10 Years
Green Shoots for Inflation
Thursday, June 18, 2009
Tuesday, June 16, 2009
What if you were a country that is a huge holder of the dollar? Apparently, it is bullish and a surprise to the media when countries don't come out and denounce the dollar (like Russia today - basically supporting the buck today). I imagine they will do that when they aren't as knee deep in it - just like a common investor does once he is out of a stock.
Monday, June 15, 2009
Sometimes just coming out even is still OK as a trader... the toughest thing is as perfectionists many traders don't see it that way. Remember - it is OK to pat yourself on the back even when you don't make money some days.
Also taking a shot at a swing long in SLV (still have my core piece on) here at 13.93 (which corresponds to the 50 day EMA) - stop on this trading piece under 13.5. Not huge size since I already have exposure on this trade.
1:20 pm post trade on SLV update - moving stop up, not liking the PM action $13.74 and we'll concede - 2:44 update - a strong close $14+ keeps me in and a close below I sell off the add from today but keep my core position. closed the swing position in SLV into the close. not a fan of sitting on swing positions that close at the low the day the day of initiation.
Sunday, June 14, 2009
"The S&P has been stuck in a 300-point range, from 700 to 1,000, since last October. There are seven reasons traders fail to make money in range-bound markets.
1.) They forget to look at bigger picture and adjust style as markets adjust. Some traders think using the same investment approach for trending markets and range-bound markets is being “consistent.” But in range-bound markets, you have to be more mindful of when things are at the top of that range or falling towards the bottom.
2.) Overcomplicate things rather than just keeping it simple. In short, dummy it up a bit. Accept the fact that trading is really a game of up, down, and sideways and you can inprove your trading profits.
3.) Fear of missing out on that home-run trade. Trading is really about making small money on a lot of trades rather than hitting that $1 million trade. All traders miss out on a great trade somewhere in the world. In fact, the home run trade could actually turn out to be a whiff. Remember, sometimes the best trade is the one you don't make.
4.) Think “I have to be right on a lot of trades to make money.” Wrong! Some of the best traders in the world have winning percentages lower than 50 percent. Success in trading really is about how much you make when you're right, and how much you lose when you're wrong. Keep that spread wide, and you're on your way to success.
5.) Believe they have to trade without emotions. First of all, it's impossible because all humans have emotions. What you need to do is learn how to control or compartmentalize them so they don’t end up making decisions for you. Keep your emotions in a bottle and you're on your way to success.
6.) If I lose money, I stink. Sometimes, you make money on bad trades and lose money on good trades. More important is the caliber of your trades. Do they have edge? Are they high-caliber trades? Judge your success based on that information, rather than your P&L.
7.) They take losses “personal.” The market is not out to get you or anyone else. We're just operating within its context. If you treat it like a business, you're much more likely to have success in range-bound markets."
Saturday, June 13, 2009
Click on the picture for the full article from Acamar Online. I would definitely agree we have not gotten to speculative mania. I repeat most people own no gold or precious metals at all... but everyone owns dollars and stocks and bonds?
From Bespoke Investment Group ( I would note oil to nat gas ratio is around 20 right now while history says it is usually around 10) - you do the math:
While you wouldn't expect it from the price of natural gas, trading in the natural gas ETF (UNG) has recently become extremely active. For much of the last few years, investors who wanted exposure to energy related commodities bought USO. Over the last several weeks, however, investors have been increasingly flocking to natural gas. Over the last 50 trading days, the total dollar value of trading in UNG has risen to 77% of the dollar volume in USO, and it is up over 900% from levels we saw in March (7.6%). For all the new buyers of UNG, if only the price of natural gas could follow suit.
Also, check these articles:
Here's one I added late on the problems with commodity ETF's and the rolling issue - talks specifically about UNG
I am long UNG
Maybe we snap right back on Monday and recapture those levels, but it looks like gold's assault on $1,000 is again thwarted for the time being.
Thursday, June 11, 2009
I am long UNG. Based on a the cost of oil vs nat gas - nat gas should be a no-brainer to catch up in a big way.
Wednesday, June 10, 2009
The $19B reopened 10-yrs went off at 3.990%, with a 2.62 cover and an OK 34.2% indirect bidder take. The break down, with the demand for more yield playing against the decent $2.62 offered for each buck. The bonds have broken further with the 10-yr tagging 3.986% as the 30-yr, which will have its auction issue tomorrow, is back at the worst levels since Oct 2007 - blurb from briefing.com
Rising yields are likely to kill the refinance business that helped drive the strong Q1 results of many banks.
Tuesday, June 9, 2009
Monday, June 8, 2009
Sunday, June 7, 2009
Here are a few more of his articles:
We're Due for a Serious Pullback
The Coming Economic Collapse
I will keep linking his stuff up. Happy Sunday y'all from a small sports bar with internet access in metro Detroit. And ohh yes... I am having a drink - Oberon, a Michigan beer for those from wherever try this stuff...
Long GLD - average purchase price of $80.66
Long GDX - average price $31.01
Long SLV - average price 11.27
Long DBA - average price $25
Long USO Jan 2010, 35 calls - average price $4.25
Long UNG - average price $13.88 (added this week at $13.5-13.6)
Short TLT - average price $117.97
Long TBT - average price $39.50
Short SPY - average price $92.09 (sold some more short Friday morning at $95.29, of which I kept half of that add on for the longer term)
Short QQQQ - average price $34.80
I also sold a small amount of June USO 40 calls on Friday to pick up a little income as I think there is a possibility of oil to steady out for a week or so.
I have several smaller cap names I own, but for this blog I am going to keep it to the more macro names. Maybe in the future I will add a small cap section.
Check back later for stocks/etfs I am watching for entries.
Saturday, June 6, 2009
I am on the bus with Jimmy on this one (meaning, I think treasuries are a terrible place to have your money). I am and have been short treasuries as mentioned before.
Friday, June 5, 2009
This article courtesy of Omnisans Investment Research's Graham Summers
How’s this for a bubble?
In 1965 one in ten Americans owned stocks. In 1990, one in five Americans owned stocks. Put another way, it took 25 years for stock ownership to double in the US. And most of that growth came between 1983 and 1990 with the introduction of 401(k)s, IRAs and other stock-based retirement plans: suddenly anyone with a large scale employer could invest in stocks without having to open a brokerage account.
Thanks to the Internet and low fee online brokerage accounts, it only took seven more years for stock ownership to double AGAIN. Put another way, the rate at which new participants entered the stock market accelerated four fold between 1990 and 1999. By the end of the 20th century, 48% of US households owned stocks.
This is the one bubble no one talks about.
I’m talking about the bubble in “investing in stocks.” Never before have so many Americans done this. It gave us one of the biggest bull markets in stock history: a mega-18 years run from 1982 to 2000. But it also means that stocks have got a long ways to fall to get back in line with their historic relationships to other asset classes.
A lot of commentators talk about how gold is near an all-time high and that stocks have fallen 50%, making them cheap again. However from a long-term perspective, gold and stocks are nowhere near their normal relationship.
According to Dr Marc Faber, editor of the Gloom Boom Doom Report, gold and stocks move in distinctive long-term trends. Over the last 110 years, these trends has staged six major phases:
- 1900-1929: stocks outperform gold
- 1929-1932: gold outperforms stocks
- 1932-1966: stocks outperform gold
- 1966-1980: gold outperforms stocks
- 1980-2000: stocks outperform gold
- 2000-???: gold outperforms stocks
Overall, the median stock to gold ratio for the last 106 years is 5.4. In other words, throughout the 20th century, on average 5.4 ounces of gold would buy one unit of the DJIA.
Today, gold trades at $980. The DJIA trades at 8,500. This puts the ratio of gold to stocks at 8.6. Thus, the DJIA needs to fall to 5,292 (a 37% drop from today’s level), gold needs to rally to $1,574 (a 60% rally from today’s level), or some combination of the two, in order for gold to be appropriately priced relative to stocks again.
When exactly this will happen is anyone’s guess. The gold vs. stocks trends over the last 106 years have ranged in length from three years to 29 years. However, judging from the Fed’s money printing and the recent action in gold, it’s quite possible we’ll see a mammoth run in the precious metal sometime in the next 18 months.
During the last bull market in gold, the precious metal rose 2,329% from a low of $35 in 1970 to a high of $850 in 1980. However, during that time, there was a period of 18 months in which gold fell nearly 50%.
From mid-1971 to December 1974, gold rose 471%. It then fell 50%, from December ’74 to August ’76. After that, it began its next leg up, exploding 750% higher from August ’76 to January 1980.
Now, in its current bull market (2001 to March 2008), gold rose over 300% from $250 to a little over $1,000. And just like in the mid-70s, it began showing signs of weakness after its first big rally up to $1,014 in March ’08. At one point, it even fell to $700, a 30% retraction. Granted, it wasn’t a full 50% retraction like the one that occurred from 1974-76. But we are experiencing a financial crisis. And gold is the most common catastrophe insurance.
If we were to go by the historic pattern of the gold market in the ‘70s, gold should experience upwards resistance for 19 months after its first peak today. Gold’s recent peak was $1,014 in March ’08 (roughly 14 months before the writing of this report). If this bull market parallels the last one, then gold should renew its upward momentum in a very serious way starting in October 2009. And this next leg up should be a major one (the biggest gains came during the second rally in gold’s bull market in the ‘70s).
In fact, it’s already happening…
According to Capital Gold, a precious metals dealer, the demand for gold from self-directed IRAs has more than doubled since January 1, 2009. The World Gold Council notices similar spikes in demand for the gold ETF, writing “Inflows into gold ETFs continued to grow throughout the quarter, with investors buying a record 469 tonnes of gold, dwarfing the previous quarterly record of 145 tonnes, set in the third quarter of last year.”
Globally, entire gold markets that didn’t exist in 1980 are now beginning to buy the precious metal. Vietnam started trading gold futures in June 2007. Already the exchange trades around $100 million in gold futures a day. China’s Shanghai Futures Index started trading gold futures just a few months ago. The latter country has already surpassed the U.S. as the second largest consumer of gold behind India.
Bottom line: don’t let the talking heads fool you. Stocks are not cheap, especially compared to gold. And the bull market in gold is nowhere near over. Over the last 35 years, more Americans began investing than at ANY other period in history. As stocks collapse later this year, they’ll either pull out their money pushing the DJIA lower OR they’ll shift their money into alternate investment classes like gold. When they do, the DJIA will fall further and gold will erupt higher.
Thursday, June 4, 2009
Huge volume reversal today in the UNG after inventories hit and natty got ripped lower. UNG has already traded the most volume in it's history today. Natty is a volatile one, but if it finishes green could be a the bottoming tail with volume that could lead to an actual change in trend (from down to up). However, UNG plays by its own rules.
I added to my natty position this morning on the spike lower ($13.50-$13.65). Stops are set below 52 week lows for now.
I am not surprised by this as I never thought the program would work as banks would not price their assets at a point where investors would buy them (low bid / high ask - no trade!). Additionally, if banks sold into this Legacy Loan Program it would not have provided capital (contrary to what the media puppet heads would tell you) unless they sold their assets for more than they were on there books at (which is unlikely). The program would have freed up some liquidity, but not increased capital. In fact, it would have more likely decreased capital as they would have had to sell at a price below the booked value and take a loss. That's why this program was DOA although the financial media got giddy about it. It's interesting though as this was one of the catalysts for the monster bank rally and now that the banks have been able to raise capital there is no need. Was this all in the script?
Wednesday, June 3, 2009
Who is this cloaked figure continually providing the late day bid?
It's a good reminder of not letting the itch to act consume you when you have a no-conviction idea but need to "get in the game".
Also, over the next week I will be posting an article that relates to this in some respects called "Trading on Tilt". Check back y'all!
Tuesday, June 2, 2009
Monday, June 1, 2009
First, I live in metro Detroit (and strangely for people who haven't been to the suburbs of D-town it's a great place with great people), so it is hard for most of my friends and family to understand why I have been so negative on the Detroit autos for years. Unlike the mass media, I don't think the product they produce was the main problem at the end. I told people these companies would eventually go bankrupt / or something along those lines for several reasons. Why? Well for the following reasons and after each point I follow with a parallel to the United States.
1. Because GM had massive pension / post retirement liabilities which made it almost impossible to stay in the black and service those obligations (US parallel = social security / health care, etc.)
2. Many of the workers (not all) had an entitlement mentality. The union brought a mentality where these people really thought they were entitled to be overpaid not based on merit, just because. Now this attitude will be shattered as these people realize a non-UAW protected job, if you can find one, may pay one-third for the same work and you will be expected to produce. I heard stories about how when a new young guy would start at a big 3 plant and be working too fast, the older workers would say, "Slow down, son - we do it at this pace". Getting paid the same no matter if you achieve or not will never succeed. (US parallel = this type of subsidization of under performance and lack of effort seems to be in line with the current administration's mindset - which in my opinion itself is the biggest cancer for our country of any - if people think they should do the least to get the most (social programs, government subsidies, etc.) because they "just deserve it" how can you have long-term success in a company or a country? Also, by supporting failure you destroy successful people's drive to achieve.)
3. GM made poor investments to build its businesses and had a tremendous waste in spending that was supposed to build the company and this built its huge debt obligations. (US parallel = the government has "invested" in not letting failure be an option for many financial institutions (call that a huge off balance sheet contingent liability of the US), created a wasteful stimulus plan (for the most part), and plan to continue to create deficits that just like GM's deficits will have to be paid at some time. And like GM these investments will be shown to be near-sighted and the benefits will fade as quickly as they started. I think the government is providing tax payer money in some very inefficient ways.
4. The suppliers to GM didn't trust them and wouldn't invest in them. I went into a supplier plant once and one side was automated with brand new equipment and the other side looked old and had 100 people working in it. I asked the owner what that was all about. He said the automated side is devoted to Toyota and the old side was for GM. I again asked him why and he said because GM might pull all of his programs the next day to save a nickel and if he made the investments he would be S.O.L. He said Toyota would not treat him like that as long as he was a responsible supplier. (US parallel = Some of our suppliers of capital, namely China, is beginning to lack some trust at our country's fiscal responsibility. If China and other countries do stop or slow the treasury buying, I can't see how the US will finance the debt other than to seriously monetize / inflate / devalue the dollar, etc. in the nearer term)
There are 4 symptoms I see that caused GM's demise that the US is showing signs of... So, what does this mean to a trader. To me, it indicates positions in precious metals, select commodities and short treasuries are appropriate.
Black Swan Fund Makes Inflation Bet
Troubled Bank Loans Hit a Record High
Insurers buying gold - new link since this morning
Obama's hedge funds latest investment
GM into bankruptcy - Market up over 1% pre-market (after the mysterious late Friday burst) as the bulls and friends look to break the recent trading range to the upside.
Also, CSCO and TRV into the DOW 30 and GM and C out. Sorry AAPL - wonder if AAPL gets nicked as lots of folks were "hoping" for AAPL (at 137 now) - not in this market.
I will add some more links I am reading this evening to this post - so stay tuned. Also, I will be posting my thoughts on GM this evening (I am from Detroit so I have to drop some thoughts on Government Motors here and they may surprise you!)