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October 9, 2008
Random brief thoughts...I'm tired and just want to get out a few
quick observations and charts...
My guess is tonight is when all the people who have been
agonizing about what to do with their stocks finally decide they
can't take it anymore, and tomorrow the phones will be ringing
off the hook at brokerage houses as the general public exits the
stock market en masse, classically selling everything they have
into the market's low tick...With the Dow down 1750
points this week alone, I'm sure every evening's economic news
has been incredibly frightening for the average invested
American, and today's 678 point drop will be the straw that
pushes many of them to liquidate, tomorrow, at any price.
From my own perspective, as regards stocks and the
economy, I believe the fear factor cannot go any higher than it
is right now, and it is therefore time for the equities markets
to end their decline.
The financial system is not going to fall apart. We are not
entering a Depression. All the government and central bank
measures being taken, here in the USA and in unison around the
globe, will have their desired effects...and the economy/markets
will probably pull out of the hole we are in.
I try to stay away from actually trading the stock
indices, but I do think going home long either the Dow, S&P or
NASDAQ futures (or call options) this weekend may have big
profit potential (and obviously big risk). The
newly formed G-20 will be in Washington this weekend to confer
on further means of stabilizing the world markets and I firmly
believe they have the power to do so, even if it takes some
Sovereign Fund or two being asked to do something like buy
50,000 S&P Futures contracts ahead of Monday's trading...Crazy?
I don't think so...If all of these governments are essentially
now buying banks, insurance companies, brokerages, mortgages,
etc., why can't they go out, behind the scenes or not, and just
load up in the futures markets to get things cranking again on
the upside? Isn't this whole credit thing supposedly about
confidence anyway?
Since May, my general approach has been to be long
Treasury Bonds and short just about everything else there is,
which, as some of you know, has paid off in a big way.
At the moment, however, we have only one remaining
short (the cattle complex) and have no immediate interest in
shorting any other commodities...In fact, there are several
commodities, both of which might be considered as proxies for an
improving economy, that I now think are major buys.
Give me a call if any of these idea interest you...or if you
have any of your own you'd like to explore.
Thanks,
Bill
866-578-1001
770-425-7241
Still see Cattle collapsing...
I am sure there are tons of speculators thinking
Cattle have gone down so much they must be a buy...but I think
the move is just getting started...As I've said for
years, the meats seem to routinely make "stupidly" large moves,
and with this market just leaving record highs, and in an
economy/stock market debacle that NO ONE in the cattle business
was anticipating, I'm supposing the downside could be even much
lower than the objectives I've mentioned on these two charts...We
are still establishing new short positions in both these
contracts.
Still Buying Treasury Bonds
With the world equity markets probably having permanently
eliminated a large percentage of baby boomers (worldwide) as
ever being interested in owning stocks again, I believe the
attractiveness of US Treasury Bonds has grown tremendously.
This IS the safest, most respected long term fixed income
instrument on the planet and I strongly believe there is more
than enough demand to drive Bond prices sharply higher...
Much ado is currently be made about the Treasury now having to
issue large quantities of Bonds (heavy supply) to pay for the
varied aspects of the Bail Out programs, and that rates "will
have to go up" (and prices lower) to attract buyers...I think
this is absolutely ridiculous logic...Internationally,
there are hundreds of millions of dollars earmarked every day
for buying fixed income, and in the current environment where
everybody is deadly afraid of just about any paper asset you can
name, I believe ANY quantity of 10, 20 or 30 Year Treasuries the
USA wants to issue would be gobbled up in 5 seconds.
I STILL SEE THE BOND MARKET GOING A LOT HIGHER, AND
RATES A LOT LOWER...
Buying Cotton
I am not marrying this market again (as I did for three long
years) but I see it as one of the most undervalued commodities
we trade. It's late. I'm tired...so I'll just say, for various
reasons I think it could be set for a relatively straight up
15-20 cent move...and with this in mind I started buying it
several days ago...This is one of my proxies for betting that
all the actions being taken by our government, and just about
every other government there is, WILL result in a big upturn in
the markets.
Buy the Lumber Market
I am not insane...
I'm pretty sure the first impression of most people would be to
assume I'm joking...Everybody knows we are way overbuilt in
everything so how could I possibly expect lumber to go up?
For now, I'll just leave it at this oversimplification...I
would guess, just here in the Southeast, easily 75-80% of lumber
mill production has totally gone out of business in the past few
years due to steadily declining lumber prices, combined with
rampantly higher energy costs (mills are HEAVY energy consumers)
and sharply reduced demand...And I believe we have
reached the point where even subnormal demand could overwhelm
what little production still remains...and result in prices
suddenly leaping off these roughly 15 year lows...
I would also point out these are FUTURES contracts, and we are
therefore not trading the present. As we head into next year, I
expect some of the massive stimulative government actions
(again, worldwide) to have taken hold and many markets that look
like dogs today will have probably rallied somewhat sharply off
of their severely depressed lows.
From another standpoint,
I would point out, while the Dow has fallen 1750 points this
week, at the same time, Lumber has only dropped $2.00...Look at
today's action. The Dow was down 678 points today, while lumber
closed up $7.60. What does that tell you...????
I say you buy Lumber
right now, while everybody is scared to death...
And I don't think this is
insane, especially when I note this is one of the few markets
where options are "cheap", meaning the buying both sides
approach (2 calls to 1 put) appears to be perfect for this
trade.
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