iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,428 Blog Posts

Commodities Unraveling

Ultimately, the end of the commodity run is in the best interest of our country. The speculative run up in commodities has trickled down to finished foods and is hurting the consumer. As you know, the price of gold has served as a hedge versus the declining dollar.

At least for now, some of the speculative excesses are being bled out of the system, led by big drops in [[GLD]] and [[USO]].

Personally, I own gold, via [[DGP]], to serve as a hedge against my ag shorts. However, compared to my [[SMN]], [[POT]] and [[MOS]] short positions, DGP is nominal.

In no way do I believe the the dollar is a buy here, quite the opposite. If you want to take advantage of this dip in gold, it makes sense to hedge it with an SMN purchase, which gets you short some gold stocks.

Best case scenario for the bulls: commodity prices collapse, alleviating the inflationary pressures on the economy. As much as I would like to believe that, it is likely this dip is just an ordinary pullback, prior to hitting new highs.

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36 comments

  1. wow

    Whats the matter Fly? You don’t buy GS, LEH & MS’s estimate-beating numbers?? Pay no attention to those pesky year-over-year numbers.

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  2. gappingandyapping
    gappingandyapping

    Do you have an relative target on SMN, DCR, DUG? These are my largest positions. I am heavily short oil.

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  3. gappingandyapping
    gappingandyapping

    By the way should MON break below 100 its going to get nasty for them.

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  4. CubsRock

    Time to buy ag you say 🙂

    Also Fly what’s your take on the idea that we go up before all the bad info is out. We are forward looking. It seems as though you are waiting for the the next shoe to drop, what if there is only one shoe left?

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  5. Perhaps...

    Commodities may be unwinding to raise capital for an impending second down wave in the financials. Perhaps, perhaps, perhaps. And if so…scary, scary, scary.

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  6. wow

    Shorting some FNM, LEH & MS here.

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  7. Big Mike

    Fly,

    I dont know if its just me…but I dont think the Bulls gave one shit about inflation (aka. commodities, oil). Every time commodities hit new highs, market had no impact whatsoever.

    Short GM, great opportunity after popping 9% yesterday.

    Its not too late to buy April Puts contract on USO, or April Puts on the Euro.

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  8. alphadawgg

    Commodity pullback is normal profit taking, not panic.

    I bought more DGP today. Look for another 50 bp rate cut at the next Fed meeting.

    Passed on USO, for now.

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  9. The Fly

    Mike:

    That’s true. However, for the most part, Wall Streeters are morons, unable to discern fact from fiction.

    The bulls point to BIG Chindia demand, which they say is good for ag and the economy.

    I say: that’s retarded, since it costs us more money to buy a bagel.

    At the end of the day, if commodity prices collapse, it will be equal to having a giant tax cut—which is good.

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  10. Employee8

    So where will all the $ go that are coming out of commodities ….

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  11. TrapperJohnMD

    Everyone is expecting a continued rise…everytime -EVERYTIME in the last 8 weeks the market has gone counter the expectations.

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  12. Juice

    It looks like the dollar has entered a period of strength, coinciding with news that the eurozone, thanks to the weak $, has passed the USA in GDP.

    This will help a price drop in commodities & help ease inflation, temporarily.

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  13. Big Mike

    Fly,

    Theoretically yes, it should be good for the overall economy. HOWEVER, if this commodity shit does unwind, we can make MASSIVE money shorting the shit out of this bubble once it pops (we can all agree its a bubble, once people say “what fundamentals?”).

    We cant’ short financials forever (too crowded of a trade these days anyways).
    I guarantee you, there ARE MUCH LESS people shorting ags/commodities than people shorting financials.; hence the greater profit potential.

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  14. The Fly

    Mike:

    I agree. Currently, I own zero SKF. I am short LEH (today), FED, WM and DSL.

    But, by far, my largest shorts are MOS, POT and long DUG and SMN.

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  15. The Fly

    LNN is out of control.

    Milk the Farmer.

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  16. alphadawgg

    LNN will give it all back. Ag sector will drag it down, kicking and screaming.

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  17. alphadawgg

    For those interested in a pairs trade, short LNN (90.46) and buy VMI (80.66), at your own risk, of course.

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  18. TrapperJohnMD

    Back to pre-Fed levels. Bounce or accelerate down?

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  19. seller

    Fly, don’t you think the ECB will eventually lower rates or international chatter about combating the weak dollar will lead to a rally in the dollar?

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  20. gappingandyapping
    gappingandyapping

    Macke is calling gold and oil broken. Would you agree?

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  21. Crude Broker

    Watch the bandwagon on crude today, it is expiry today due to Good Friday. The May contract could very well be up $4 tomorrow. Just a thought. However, all the charts seem to be breaking to the downside. USO, DBO, …DVN, NBL, OXY, and APA all looking like they want to be shorted.

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  22. Breakfast Meat

    Fly, Anyone who hates the IBs as much as you do can’t be a total asshole. Kudos!

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  23. The Fly

    Crude Broker:

    Where the fuck have you been?

    Good to see you lurking.

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  24. TrapperJohnMD

    If our economy is in the worst shape since WWII then why is the S&P only down 10% for the year? Last I checked a statement like that would warrant a +20% decline. No?

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  25. gappingandyapping
    gappingandyapping

    really need SMN to break out of this range here.

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  26. gappingandyapping
    gappingandyapping

    Regarding DUG:

    https://admin.minyanville.com/assets/FCK_Aug2007/File/Pics8/http_CZgdTa.gif

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  27. Crude Broker

    I put a post up yesterday letting you know that I’m off for the next two weeks or so hanging out at the house. Oh, and that I was sorry I haven’t been around contributing. I can’t access “questionable websites” on my desk at work. It took me a fucking month just to get approved to have Drudge and Yahoo Finance approved to watch on my screens. It should change soon so I can watch you cuss out people and throw Monster cans at them.

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  28. BOOMER

    BOOMs about to get a 3 handle

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  29. Big Mike

    Dougie Kass is jumping on the SMN wagon (shorting XLB).

    Anybody broken down MS numbers? Man, they were really good. If you do a relative comparison analysis with Goldman, they beat them by almost every sector.

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  30. bagger

    BOOMER I hope your 36 call won’t come into play

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  31. JoeyBagofTricks

    Jim Rogers is saying the Fed is “Out of Control”

    LOL!

    Anything to do with Gold & Commodities tanking (he is long of these) and Financials to the moon (he is short of these) the past few days?

    Every dog has its day, Jim, and today you are being cornholed nicely.

    LOL!

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  32. morpheus

    Brack Obama stole my speaking style from the matrix where I speak in front of that big crowd… i think the 2nd one, maybe #3

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  33. Joey-bag-of credit-cards
    Joey-bag-of credit-cards

    I am taking a cash advance from all my credit cards and going long XLF. Wish me luck.

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  34. BOOMER

    bagger – did you buy? the selling has been quite steady. unreal $36 tomorrow? $28 in July?

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  35. bagger

    Yeah I bought. mental stops, wall/head.

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  36. Eddie

    oh man what are you all doing? It seems like the only thing you do is writing comments. Don’t be crazy!

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