I demand cheap and abundant crude oil, like it were my birth right.

I demand it because it means the revitalization of this country.

I demand it because it means the broken dreams of our enemies.

I demand it because it will make me lots of money.

But what I demand won’t necessarily come to fruition here. While our economy has obviously slowed, that may already be accounted for, in the hearts and minds of oil traders.

This may be the last chance for the commodity markets to break down further; if crude can’t cave back below $80 again, I would be foolish to ignore the presence of a forming level in the pricing.

And maybe that’s where oil should be. Cramer may have been correct; shy of total destruction, crude can trade down into the $80’s after you flush out the speculators.

But I want, very much, to believe it’s good for more than that. I want to believe that oil can go at least into the $70’s.

This is the last good chance for that. Next week will tell whether or not it can be done.

Comments »

I don’t quite know what’s going to happen after tomorrow. What concerns me is the bipolar nature of the two main outcomes I see.

We need to deleverage this beast. But how we do it makes a world of difference.

If we devalue the currency, everything goes much higher. If we let mother market sort things out through failures, we could go much lower. Or maybe we let the consumer sort it out and we just float along as the working man deleverages us all.

Ideally, I would have more cash right now, but as I’ve opted to position myself in assets I feel will be able to continue making money and grow despite the second option of deleverage-by-failure, I don’t want to sell out of anything.

And even though I’d rather not be short something like oil with the chance that the Fed announce they intend to eat the dollar’s value – well because I’m so long my other positions I can’t really afford to not have a hedge on, in case the world should burn, if you catch my drift?

So I’ve decided to just hold strong with what I have. I still hold AEC, CLP, AWK, BG, CCJ and physical silver, with a now scant <10% cash position (after associated short funds) and an ample UCO short stake.

Depending on how we go up or down, that may not be enough. If we absolutely collapse, I will take it to the teeth along with everyone else; but God willing so will oil, so maybe I increase my cash level as a percentage of my portfolio anyhow.

And if we should go way up well, I can only pray oil doesn’t graze $200 before BG does.

Going into this summer I had one basic set of mind. I thought the Fed was done easing and I figured commodities were overbought, the dollar was oversold, and we needed a good pullback before the economy could strengthen up, with us recovering into Christmas.

That was before Europe. That was before China. That was before the manufacturing slowdown in the U.S. Is this all part of people overreacting to the selloff in commodities and such? Maybe that’s all it is.

The real point here is that I don’t know enough to negate my initial judgment, so I have no reason not to assume that I’ll still end up right. As information comes along, I might see that I was wrong, but that alone isn’t enough to switch up.

I’ve lost plenty of money before now second guessing myself.

Personally, I am a much stronger investor when I find situations where I recognize things are against a wall. My back to the wall, I tend to march into the room guns blazing. But once in the center of the room, like we are now, well, I need to find my corner again.

My next adjustments will be reactionary. I will extend the duration of my oil short into next week.

Let’s see what Jackson Hole has to offer.

Comments »

The guy usually gets a call from financial institutions when they desperately need a) lots of capital and b) credibility.

Here’s a quick list of notable institutions that have contacted Buffet looking for a pump, when they needed help, off the top of my head.

Lehman Brothers
Goldman Sachs
Long Term Capital Management
Solomon Brothers

Now maybe I’m jumping to conclusions here. This list is not particularly long and there could be plenty of times when perfectly sound financial institutions have requested he make an investment.

But usually when I hear of Buffet making ventures into the financial sphere, it’s to gobble up obscene deals put together by completely desperate corporate managers who really need a hail mary.

So what does this say about where Bank of America was/is?

Comments »

Come on, seriously. Someone needs to go to jail or we need to drop this pretense that trading inside knowledge is wrong.

This double standard is some serious garbage. Looking at you Washington (you’re both capable to give direction on this and probably guilty as shit of it).

Comments »

I’m glad I have a full time job. I would be ripping my eyelashes out from boredom if I didn’t have a separate outlet to distract me from today’s low news feed and disjoint market action.

The most interesting thing I’ve come across today is France’s recent announcement of austerity (embrace slower growth). I would have typically counted the 5% slide in housing, but I saw that coming, so it wasn’t really a surprise, or interesting.

And the market itself is just not doing it for me right now. Too boring; I’m waiting for confirmation or error to point me in the right direction and there’s none of it happening here. Everyone is coasting into Friday, it seems.

Now, in my portfolio, there is one notable exception to today’s weak handed, disinteresting activity.

AWK is on a streak, up 2%.

This is interesting to me. If you’re looking for a place to allocate capital, the utility space still likely holds some good purchases. American Water is a quality name and I’m very much a fan of them, holding a good chunk of my net worth in their stock. They pay a decent dividend as well.

Good resistive position, should we start to break down lower. And also a good name that will continue to profit if we should start to punch higher. It’s worth considering, along with select other utility companies, just for their ability to turn a profit without being highly influenced by other economic activity.

Now I think I’m going to sneak off for an afternoon snack; maybe some bruschetta.

Comments »

(As an introduction, anyone see the price of wheat and corn lately?)

I’ve been pondering this question recently. It’s one thing to break down market action into two camps (Clam moves, Clam doesn’t move). It’s quite another to say, “If Bernanke decides to intervene in the markets, just what exactly will he do?”

Case in point; his favorite maneuver up until now has been to directly purchase U.S. bonds on the open market. This serves three main goals. (1) He forces yields lower, which in turn aid all sorts of derived interest rates for consumers such as mortgages. (2) He expands the monetary supply, which was a key goal of his given the amount of deleveraging that was going to occur, and (3) he creates an automated form of monetary retraction which occurs at precisely the rate at which the bonds redeem, helping to form a sort of stable safety measure should things get out of control on the inflationary end.

But, with 10 year U.S. treasury bonds hanging out around 2%, it’s difficult for me to imagine that Bernanke is too excited about the prospect of buying up more treasuries.

In terms of the three effects of this action, it would still technically play into (1) and (2), but with (1) yields are already so low, if people aren’t being incentivized to buy and invest now, it’s difficult for me to imagine a couple thousandths of a percent (at an enormous cost to the Fed, I would add) is going to really change that. And with respect to point (3), paying for bonds at a lower yield also slows the scheduled withdrawal of money from the economy, making the control the Fed has over the supply less potent.

And, another point: I know everyone is keen to pretend that inflation isn’t an issue right now.

But looking at the prices of grains recently (refer to top), that’s not entirely honest. Materials are significantly cheaper than they were trading a month or so ago. But food is still very expensive, and getting more so.

If Bernanke eases the U.S. economy, he threatens to create a localized inflation in the grain market, which given its already lofty disconnect, could very well threaten to starve out American poor, as well as much of the rest of the planet.

After seeing the way food prices are not deflating like crude or copper, I am not now convinced more Fed action IN AMERICA is guaranteed (pardon my grotesque capitalization usage, but that’s important).

However, could Bernanke perhaps intervene by trading dollars for Euro’s, and then buy up foreign denominated debt?

It’s obvious that Europe’s problems are America’s. And that much of this debt/leverage needs to be unwound. However, in this situation, Bernanke’s actions would be net neutral on the dollar inside of American markets so long as those dollars stayed in foreign reserves, while also giving Bernanke a much higher yield for his hand.

If managed correctly, they could unwind both the debt of foreign nations and the added currency relatively quickly.

If I’m going to look for a maneuver by the Fed, it’s going to be along these lines. I just don’t think they can risk expanding the monetary supply here at home too much more. All of that money would immediately start chasing up equity and commodity prices. Very little of it would go to new ventures, deleveraging, or pro-growth developments.

Comments »