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December 5, 2007
I have been in this business since 1980 and the futures markets
are now more volatile than I have ever seen them. Primarily as a
function of the billions of hedge fund dollars now sloshing
around the markets, massive and frequent large percentage
commodity moves now seem to be the norm. While big moves can
mean big opportunities, they also can mean big risk and I can
not imagine a better time to be using the Buy Both Sides
(weighted one way) options strategy I have recommended for
years. Although the approach is not infallible, if all this
strategy really needs is to be big wrong or big right, this is
just about as perfect an environment as you will ever get...And
I promise you, as one of my wall "reminders" points out...YOU
WILL BE WRONG. YOU WILL BE RIGHT...This
will always hold true in the futures market and I don't care who
you are or how absolutely, totally "can't miss",
perfectly logical your opinion.
Anyway, after not writing anything for months, I guess it's time
to throw some ideas out again. If you think any of them make
sense and have the cash to risk, give me a call. If you "know"
I'm dead wrong and have the cash to risk, also give me a call. I
promise, you won't hurt my feelings.
An early Happy New Year to you all....
Bill
770-4245-7241
866-578-1001
Insanity?
Buy The US Dollar Index
This market is the real reason I finally decided to send out a
newsletter.
I don't have to tell you that virtually all the "expert"
economic opinion out there is absolutely bearish the dollar.
Whether it's high tech billionaires, supermodels, Wall Street
gurus, or even Venezuela's Hugo Chavez, they are all telling you
the Dollar is trash, that the only direction the Dollar can go
is down, that the Euro is the new currency of choice on the
planet...and basically that you are a damn fool if you think the
dollar is a buy.
In fact, they don't call it the Dollar anymore...It's
always the SINKING DOLLAR, and always accompanied
by tons of "logical" reasons as to why there is no way it could
be otherwise.
I see it differently. I think they are wrong. I think
this is a classic "no hope" bottom in a market that could be a
whole lot higher three to six months from now.
Why?...I'll start with the following two quotes from Alan
Greenspan.
July 16, 2002
"I would like to raise a technical issue and a flag of
caution regarding those forecasts (of the dollar) --or, for
that matter, any forecast of exchange rates.
There may be more forecasting of exchange rates, with less
success, than almost any other economic variable".
"Although measures such as real interest rate differential,
differential rates of productivity gains, and chronic
external deficits are often employed to explain exchange
rate behavior, none has been found to be consistently useful
in forecasting exchange rates even over substantial periods
of one or two years."
Nov. 19, 2004
"Statistics have shown that forecasting exchange
rates has a success rate no better than forecasting the
outcome of a coin toss."
I've brought this up before, but if
Greenspan (whether you like him or not), at the top of the
economic info chain, says "Nobody knows where the currencies
are going", I'll accept it as a near fact...
When I then note that the "sinking dollar" is
about as unananimous a opinion as I have EVER observed in
the futures markets, it leads me to the simple conclusion:
BUY THE DOLLAR.
I could sit here and throw out plenty of my own economic
reasons for not thinking the US Dollar is going down the
tubes (like suggesting there is a lot of foreign money that
still consider this to be the prime business and real estate
location in the world) but then I'd just be another
you-know-what with an opinion worth no more than a coin
toss. In truth, I have no idea where the Dollar will be six
months, a year or two years from now. All I do know, at this
very moment, as a jaded old commodity trader/broker, is
buying the dollar---now---is something nobody else wants to
do...And I can't count the times, in I don't know how many
markets, that this means that buying this market is exactly
what you are supposed to do.
Some charts and a few approaches follow....
Here's where the Dollar is from a 30 year perspective...I'd
guess there have been more than a few reasons since 1973 to
suppose the Dollar was "trash"...but somehow it never really
happens...You always hear the expression, "Buy low..." but
this is always a lot easier said than done, the reason
being, when something really is a buy, with 99% of the
market opinion saying "Sell", it just feels stupid to throw
your money on the table and do the opposite...I'd also note
that an 8-10 point move ($8,000 to $10,000 per contract)
would be no big deal in the Dollar...
Positions can be taken a number of ways...with options, or
futures (margin is $1130 per $100,000 face value contract),
or combinations of the two...The position shown here, using
strictly options, would cost about $3180 per "unit"...A five
point rally from here would see the two calls worth about
$9000 total....A 3 1/2 point sell off would mean you could
sell the put and recoup the $3180...If these March options
expire between 76 and 77, you could lose your entire
investment.
Here are a few possibilities using the June contract. This
costs more but give the idea a lot more time to develop one
way or the other.
There really is a LOT happening in the markets...I currently
have positions and/or opinions in Crude, Gold, Rates, the
Eurocurrency, Soybeans and Cotton (yes, still long)---and as
I've finally hit the keyboard again, I will try to get to
them in another illustrious newsletter within the next few
days...
If you have an opinion, want leverage and volatility, and
have capital you can honestly afford to pour down a drain,
you ought to take a look at the futures markets of
late...Incredibly large moves in everything seem to be the
norm now and if you are lucky enough to find yourself on the
right side of a trade, the potential gains can be
enormous...And of course, it goes without saying, you can
also lose money faster than you ever dreamed possible...
Over and out...Give me a ring if only to tell me how stupid
you think this idea is....
Willieboy
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