Global Market Comments
August 28, 2013
Fiat Lux
Featured Trade:
(OIL SPIKE SENDS TRADERS SCRAMBLING),
(USO), (GLD),
(ORDER EXECUTION 101),
(THE GREAT COPPER CRASH OF 2013),
(CU), (FCX)
United States Oil (USO)
SPDR Gold Shares (GLD)
First Trust ISE Global Copper Index (CU)
Freeport-McMoRan Copper & Gold Inc. (FCX)
When Dr. Copper (CU), the only commodity with a PhD in economics, suddenly collapses from a heart attack, risk takers everywhere have to sit up and take notice. Since the 2011 top, the red metal has collapsed a shocking 35%.
So called because of its uncanny ability to predict the future of the global economy, copper is warning of dire things to come. The price drop suggests that the great Chinese economic miracle is coming to an end, or is at least facing a substantial slowdown. This dark view is further confirmed by the weakness in the Shanghai index ($SSEC) which has been trading like grim death all year. Will China permabear, Jim Chanos, finally get his dream come true?
It?s a little more complicated than that. Copper is no longer the metal it once was. Because of the lack of a consumer banking system in the Middle Kingdom, individuals are now hoarding 100 pound copper bars and posting them as collateral for loans. Get any weakness of the kind we have seen this year, and lenders panic, dumping their collateral for cash.
The high frequency traders are now in there in force, whipping around prices and creating unprecedented volatility. You can see this also in gold, silver, oil, coal, platinum, and palladium. Notice how they seem to be running the movie on fast forward everywhere these days? Because of this, we could now be seeing an overshoot on the downside in copper which may never actually materialize to this extreme in equities or other asset classes.
Watch Dr. Copper closely. At the first sign of any sustained strength, you should load up on long dated calls for Freeport McMoRan (FCX), the world?s largest producer, which also has been similarly decimated. The gearing in the company is such that a 50% rise in the price of copper triggers a 100% rise in (FCX).
So what is copper telling us today? The longer term charts show a prolonged bottoming process. If this holds, we could be seeing the early days of a resurgence in the global economy. Just get Syria, Egypt, the debt ceiling crisis, and the taper out of the way, and we could be in for a major run. That is a tall order. But just to be safe, I am buying long dated calls in the next major dip in (FCX), which may have started today.
A Penny for Your Thoughts on Copper?
Global Market Comments
August 27, 2013
Fiat Lux
Featured Trade:
(THE TECHNICAL/FUNDAMENTAL TUG OF WAR),
(SPY), (INDU), (IWM),
(AND MY PREDICTION IS?.),
(TESTIMONIAL),
(THERE ARE NO GURUS)
SPDR S&P 500 (SPY)
Dow Jones Industrial Average (INDU)
iShares Russell 2000 Index (IWM)
Global Market Comments
August 26, 2013
Fiat Lux
Featured Trade:
(RIDING WITH TREASURY SECRETARY JACK LEW)
Global Market Comments
August 23, 2013
Fiat Lux
Featured Trade:
(HOW US JOB LOSSES WILL END),
?(FXI), (PIN), (EWY), (VNM),
(OPTIONS FOR THE BEGINNER)
(BRING BACK THE UPTICK RULE!)
iShares China Large-Cap (FXI)
PowerShares India (PIN)
iShares MSCI South Korea Capped (EWY)
Market Vectors Vietnam ETF (VNM)
I strongly urge readers of this letter to log on to Amazon and by a copy of Options for the Beginner and Beyond by W. Edward Olmstead. Options contracts offer investors a wonderful instrument for minimizing risk, while maximizing the upside, and I am going to recommend many more such strategies in the future.
So, if you want to have the slightest idea of what I am talking about, get yourself some grounding in this important field by reading this book. You don?t have to be a math genius to figure this stuff out, and the risk reward benefits are great.
Olmstead, a math professor at Northwestern University, starts out with a basic Options 101 course, going into the merits of puts and calls. He catalogues the exchanges where they are listed, and the vast number of products that can be traded, including stocks, bonds, commodities, currencies, and precious metals.
He goes into the mundane, but important details on the administration side of things, such as settlements. For the more technically inclined, he launches into options theory pricing, and goes into the origins and utility of the Black-Scholes equation. We learn about the arcane world of what traders call ?the Greeks?, the deltas, thetas, and vegas of individual positions. He then launches into basic option strategies, like call and put spreads, ratios, straddles, strangles, collars, and condors.
Don?t let these terms scare you off. It is really much easier than it sounds. In fact, you will be kicking yourself once you find out how easy it is. In order to buy the book at a discounted price and give yourself a genuine trading edge, just click here.
Global Market Comments
August 22, 2013
Fiat Lux
Featured Trade:
(WHY I SOLD OIL),
?(USO), (UNG), (UUP)
(SALUTING THE ?OLD BREED?)
United States Oil (USO)
United States Natural Gas (UNG)
PowerShares DB US Dollar Index Bullish (UUP)
Global Market Comments
August 21, 2013
Fiat Lux
Featured Trade:
(WHY YOU SHOULD BUY THIS DIP),
?(SPX), (IWM), (INDU),
(THE BIPOLAR ECONOMY),
(TESTIMONIAL)
S&P 500 Index (SPX)
iShares Russell 2000 Index (IWM)
DJ Industrial Average (INDU)
Corporate earnings are up big! Great! Buy! No wait! The economy is going down the toilet! Sell! Buy! Sell! Buy! Sell! Help! Anyone would be forgiven for thinking that the stock market has become bipolar. According to the Commerce Department?s Bureau of Economic Analysis, the answer is that corporate profits account for only a small part of the economy. Using the income method of calculating GDP, corporate profits account for only 15% of the reported GDP figure. The remaining components are doing poorly, or are too small to have much of an impact. Wages and salaries are in a three decade long decline. Interest and investment income is falling, because of the low level of interest rates and the collapse of the housing market. Farm incomes are up, but are a small proportion of the total. Income from non-farm unincorporated business, mostly small business, is unimpressive. It gets more complicated than that. A disproportionate share of corporate profits are being earned overseas. So multinationals with a big foreign presence, like Intel, Oracle (ORCL), Caterpillar (CAT), and IBM (IBM), have the most rapidly growing profits and pay the least amount in taxes. They really get to have their cake, and eat it too. Many of their business activities are contributing to foreign GDP?s, like China?s, more than they are here. Those with large domestic businesses, like retailers, earn less, but pay more in tax, as they lack the offshore entities in which to park them. The message here is to not put all your faith in the headlines, but to look at the numbers behind the numbers. Those who bought in anticipation of good corporate profits last month, got those earnings, and then got slaughtered in the marketplace. Caveat emptor. Buyer beware.
What?s In the S&P 500?
Has the Market Become Bipolar?
Global Market Comments
August 20, 2013
Fiat Lux
Featured Trade:
(I?M BACK!)