Silver collapsed from $40 to $27 in 3 days and is still falling, as gold has dropped from over 1900 to now 1590. Stocks worldwide appear to now have entered bear trends while bond yields hit record lows.
In my view (and my trading record) the short term outlook has become totally unpredictable.
When the "crisis" began in 2007, I advised that the coming years would be a time of unpredictability and a time to best just to try to hold on to what one has, instead of trying to make anything.
This has indeed turned out to be true. That didn't stop me from trying to make home runs anyway, yet I should have been wiser.
The real problem ? Even when I was right, I turned out to be wrong. The moves in individual securities and commodities just didn't follow any accepted playbook which served to throw off anyone who employed leverage (like foolish me).
Best advice ? Don't listen to your emotions, try to find opportunities that make overwhelming sense, pay cash for them and let the chips fall where they may.
What are opportunities right now ?
Selective real estate: Banks are seeing the light and are beginning to dump their inventory at fire sale prices. This happens very much on a local level. Look for it: When you suddenly see properties offered at 50% of assessed value and find them to be in established neighborhoods, make an offer.
Solar stocks: Me thinks we are approaching a tipping point here: Prices for photo-voltaic elements are now dropping to levels where solar energy can compete with other sources without subsidies.
At the same time, stocks are making new all-time lows while trading at P/E ratios of 5-7 !
Silver dropping from $50 to almost $25, or from $40 to $25 in just 3 days ? Probably not a bad idea to buy a few ounces, since unlike Dollars, silver doesn't become worthless.
If we get another stock market crash, gold could drop to about $1300. That's where I would step up my buying again.
Sunday, September 25, 2011
Thursday, September 22, 2011
Mindboggling...
Headline I just read: Lybian Rebels find billions of Gaddafi's money.
The picture to the article shows crates of colorful Dinar notes with the former rulers face on them.
The article claims that because of this find they can now finance the government for the next 6 months.
Wow, boxes upon boxes of colorful paper, sporting the head of the tyrant they just pushed out. This is worth something ?
Don't the new rulers have the power to make up their own colorful confetti ? Don't the people of Lybia know that ? Why would they accept it for value ?
Here's the link :
http://www.spiegel.de/politik/ausland/0,1518,787758,00.html
Though it"s in German, Google translate can give you a good idea what it says.
The picture to the article shows crates of colorful Dinar notes with the former rulers face on them.
The article claims that because of this find they can now finance the government for the next 6 months.
Wow, boxes upon boxes of colorful paper, sporting the head of the tyrant they just pushed out. This is worth something ?
Don't the new rulers have the power to make up their own colorful confetti ? Don't the people of Lybia know that ? Why would they accept it for value ?
Here's the link :
http://www.spiegel.de/politik/ausland/0,1518,787758,00.html
Though it"s in German, Google translate can give you a good idea what it says.
Monday, September 12, 2011
Efficient Market: Crude Oil ?
For many month now, we can observe a growing price difference between the two major crude oil contracts:
Brent Crude, traded in Europe, and the WTI Crude contract traded in the USA. Traditionally, the Brent contract traded for about $2 less per barrel as it represents more a more "sour" type of crude (containing more sulfur). During the course of last year, this relationship has reversed quite dramatically: WTI now trades for $89 while Brent fetches $113.
This is a humongous $24 price difference, especially in light of the fact that Crude traded for less than $20 in 2002 and dipped below $40 in 2009.
Articles that I've read tried to convince me that WTI is now less of a benchmark (even though it still has a much higher open interest and trading volume). It's also claimed that the delivery point (Cushing, OK) is landlocked and that this prohibits meaningful arbitrage.
WTI prices have dropped from $114 in May to $89 now. Prices for gasoline at your station are still at their highs.
What these facts show IMHO, is that these prices are not the result of free market action. If the market would not be manipulated, sellers would re-direct their output to where they get the highest price. Someone would come up with a way to buy at $89 and sell at $113.
Perhaps it has something to do with federal regulations that prohibit the export of crude from the US ?
One thing is certain: even though US crude prices are almost 25% lower than prices in the rest of the world, US consumers are not profiting.
Brent Crude, traded in Europe, and the WTI Crude contract traded in the USA. Traditionally, the Brent contract traded for about $2 less per barrel as it represents more a more "sour" type of crude (containing more sulfur). During the course of last year, this relationship has reversed quite dramatically: WTI now trades for $89 while Brent fetches $113.
This is a humongous $24 price difference, especially in light of the fact that Crude traded for less than $20 in 2002 and dipped below $40 in 2009.
Articles that I've read tried to convince me that WTI is now less of a benchmark (even though it still has a much higher open interest and trading volume). It's also claimed that the delivery point (Cushing, OK) is landlocked and that this prohibits meaningful arbitrage.
WTI prices have dropped from $114 in May to $89 now. Prices for gasoline at your station are still at their highs.
What these facts show IMHO, is that these prices are not the result of free market action. If the market would not be manipulated, sellers would re-direct their output to where they get the highest price. Someone would come up with a way to buy at $89 and sell at $113.
Perhaps it has something to do with federal regulations that prohibit the export of crude from the US ?
One thing is certain: even though US crude prices are almost 25% lower than prices in the rest of the world, US consumers are not profiting.
Efficient Market: Update on SunPower
The majority shareholder decided today to schedule a vote to merge the 2 classes of stock into one, thereby eliminating the price difference between the A and the B shares.
Predictably the B shares rallied about 10% on the news while the A shares dropped.
Predictably the B shares rallied about 10% on the news while the A shares dropped.
Sunday, September 4, 2011
Here's An Example:
It's from "Der Spiegel", without a doubt the most influential German weekly magazine.
Speculating with Lives
How Global Investors Make Money Out of Hunger
If you ever wondered how dictators come to power, this is the method: You single out a group of people, make them the scapegoat and make up stories on how they are responsible for all what's wrong with the world.
Now, to be fair, utter ignorance about the working of markets runs rampant in the USA as well.
The above mentioned article is not worth reading. Just as with most fabrications of its ilk, the headline is the whole story. It's propaganda meant to lead the average reader to create a picture in his head, to promote a certain outcome.
In this case the desired outcome is to render markets meaningless and have the government set prices.
It is propaganda that is meant to prepare Germany for a new planned economy, preferably communism I suppose.
Of all the idiocy spewed forth by these highly intelligent and educated journalists, let me just pick on one:
1: Speculators, hedge funds and other nasties are investing in food items and their concerted buying drives prices out of reach for consumers.
Answer: Said speculators are not buying any foodstuffs at all, but are making BETS on what the price will be at various times in the future (hence: futures trading) !
What is the most certain outcome, if producers (farmers) are promised a high price for future production ?
Right: they'll make more, which in turn, by "Der Spiegels" "reasoning", leads to people going hungry.
Oh, and why are people making bets on higher prices ? Because governments all over the world are busy printing trillions of Dollars, Euros and Yen to deliberately drive up inflation.
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