Sunday, February 28, 2010

Update 2/28

Copper continued northward last week for altogether unknown reasons, ending at $3.24. Here are a few facts: the Fed tightened money policy, which in theory should raise the value of the USD (which it did) which in turn should send the prices of commodities down. Further, new housing sales were (again) abysmal, meaning less copper was being used. I still maintain that copper is getting ready for a meltdown, and am maintaining my "sell" order at $3.11 with another at $2.98, again both with five cent trailing stops. But a trend is a trend, and I'm not going to "sell" into this until it changes direction. I absolutely refuse to "buy" with fundamentals like these.

In news from Hooverville, here's how the State of Illinois is doing these days: "The state is in utter crisis," said Representative Suzie Bassi. "We are next to bankruptcy. We have a $13bn hole in a $28bn budget" The state has been paying bills with unfunded vouchers since October. A fifth of buses have stopped. Libraries, owed $400mm, are closing one day a week. Schools are owed $725mm. Unable to pay teachers, they are preparing mass lay-offs. "It's a catastrophe", said the Schools Superintedent. In Alexander County, the sheriff's patrol cars have been repossessed; three-quarters of his officers are laid off; the local prison has refused to take county inmates until debts are paid". Oh yes.. and the city of Harrisburg,PA this week will likely join Vallejo,CA in the bankruptcy courthouse.

The disconnect between Wall Street and the White House on one side and the rest of us living out here in Hooverville on the other is as big as it ever was. The US Gov't cannot borrow, print and spend our way to prosperity.. and yet healthcare reform ! is all we hear coming out of Washington and the media. You'd have thought the election in Massachussets would've shaken some people up; apparently it's back to business as usual.

In more positive news, the rest of us out here in Hooverville are making some headway in providing some real answers to real world problems. The latest is from a company in California that produces an "energy box" which might one day replace the entire electric grid:

Thursday, February 25, 2010

Update/Comments 2/25

Bad day: I "sold" a copper at $3.17, it went down another cent or so, then rocketed back upwards, passing the $3.22 mark at some point.. so, in and out a couple hours later for a loss of $1,250. I'm going to keep my "sell" order at $3.10. Worse, I missed my monthly goal at my real world job today. A few shots of Beefeaters Cure All always helps me in these trying times.

On to Greece: the EU and IMF did an inspection on Greece's finances and released a report today: "joint report drafted by the European Commission, the International Monetary Fund and the European Central Bank finds that the calculations contained in Greece's budget plan falls €4.8 billion short of what is needed to meet its deficit cutting objective this year". Interest rates on Greek debt skyrocketed as speculators piled onto the ailing patient. Moody's jumped onto the pile as well, threatening to cut Greece's bond rating to a point where it's not investment grade. So Greece, already suffering under crippling strikes {which in and of themselves cause economic losses}, will have to announce even deeper cuts. At some point, this becomes a political decision for Athens, and the choices are very grim:

1. Endure years of grinding depression from an IMF bailout, or..
2. Endure years of grinding depression from a default.

If the protests and public opinion become bitter enough, option two is a very real possibility; this would be a disaster for EU (especially Greek) banks. Then we come to the credit default swaps written on Greek government debt and banks. Overall, this could be a big fat Greek $500bln sh!tbomb if mishandled. My guess.. the IMF steps in around the Ides of April.

Saturday, February 20, 2010

Update/Comments 2/20

Copper went up for most of the last week; now at $3.35. With Bernanke raising rates, the USD will strengthen and so this is obviously not a big factor. Copper appears to be moving in conjunction with the stock market, fundamentals be damned. I can't see this continuing for long; I still think we have a ways down, perhaps eventually hitting the $2.00 mark at some point this year. I'm going to adjust my order and "sell" only one copper at $3.17 with another at $3.00, with both again having five cent stops. I'll also put in an order to "buy" copper at $3.46, again with a five cent stop loss.. and a modest goal of five cents. I refuse to believe this is going to the moon with fundamentals like these, but fighting trends is usually a one way ticket to serfdom.

I personally think Bernanke's decision to raise rates was a tad premature; there was a report out this week that showed bank loans in the US were down $100bln since this year began, a 16% reduction month on month, a record. Wall St did'nt seem to mind.. the DOW actually went up on a day when it was supposed to go down.

The Greek tragedy also seems to have simply stopped; a few budget slashes in Greece and lots of hot air from Athens and the EU in Brussels seem to have done the trick (thru last week at least). The Greeks have announced a $5bln bond auction sometime soon.. I can't find the link or exact date.. lets see how the markets like this issuance; it could be a staged event in that the big EU countries will buy the bonds to give the impression of stability and thus lower interest rates in recognition of their progress so far. The EU is also going to do another review in the middle of March to look at Greece's progress and then probably begin a step by step forgiveness of Greek debt. I think the markets are in a holding pattern until more news emerges, which surprises me. Greece may yet make it thru this year, though next year is a different matter entirely. I thought speculators would be a tad more aggressive than this and force the issue, especially in light of the strikes which are beginning to further damage Greece's economy. One reaction to this mess has been that the governments of Greece & Spain have sent their intelligence services to find information on the identities of these evil speculators. Let me be of assistance: Goldman Sachs & John Paulson. Yes, the very same Goldman Sachs that helped Greece hide $50bln of debt from view were busy piling shorts onto their clients. Early word is that JP Morgan has done the same service for Italy.

Friday, February 12, 2010

Update 2/12

Well so much for the copper rally; it opened at $3.06 and so I was out the moment the exchange opened.. a profit of one cent per pound ($250). After reading an article from a copper expert who says "Stockpiles are now bulging with 2 million tons of the red metal, about half of annual industry production. China is about to cut imports by half, from 3 million tons to 1.5 million tons this year" I think I'm getting ready to short this baby and so I'll put in an order to "sell" two copper contracts at $2.98 with a five cent trailing stop. I'm unlikely to be long copper again for a good, long while.

Nothing interesting happened since yesterday in Europe; perhaps they were just sick of it all and decided to give it a rest for the weekend. I still think speculators will attack Greece (and maybe others) next week.

Thursday, February 11, 2010

Update/Comments 2/11

Copper skyrocketed today, up 14 1/2 cents, closing @ $3.13.. and so I "bought" one contract at $3.05; again this has a trailing stop of five cents. This isn't the direction I thought it would go, but hey.. I'm still making money (at least on paper).. another $2,000 today. It's so easy to do this on paper, but in real life commodities trading is much different due to the emotional aspects of trading your hard earned money in a dangerous way. I drove my broker nuts with panic striken calls.. he undoubtedly answered my phone calls with his right hand, the left being used to hold the flask as I ranted.

Anyways on to Greece.. there was an EU summit which accomplished absolutely nothing concrete. Greece is supposedly in consultations with the IMF, and well they should be.. after the summit's statement, the Euro dropped and the rates on Greek bonds went up, but not badly. "Euro area member states will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole. The Greek government has not requested any financial support" it read. Look for the speculators to resume their attacks tomorrow. If this was happening to Michigan, Bernanke would've forcefully squashed this bug long ago. This aggressiveness is a big reason why these speculators don't attack California and Michigan as they do Greece. I give it two weeks before Greece cries for mercy, and by the time they do, someone else will be in trouble.. Portugal most likely.

Ambrose's always knowledgeable commentary:

Monday, February 8, 2010

Update 2/8

Copper went up five cents today, ending at $2.9250, and so my stop was triggered and I'm out of this trade. I "sold" one copper at $3.25 and the other at $3.12; therefore I made $8,250 on the first trade from $3.25 and $4,875 on the second one from $3.12.

Balance 12/28: $9,625
Loss IBM 1/22: -$180
Copper 2/8: +$13,125
= $22,570

From here, I'm going to "sell" a copper at $2.81 and "buy" at $3.05.
My guess.. we head lower and the "sell" order gets filled by 2/12.
Both will have tight five cent stops again.

Saturday, February 6, 2010

Update/Comments 2/6

Copper is heading south with a vengeance, making even mean old bastards like me smile on occasion. So far I've made about $16,000 off this trade so far; this puts my total right around $25,000.. I've more than doubled my money in the three months I've opened this blog. This is one of those "once in a decade" winners you brag about after a few too many scotch/sodas. I'm going to simply let it run, keeping my five cent trailing stop in place. As I think the USD will continue to get stronger and new housing weaker, I can see copper heading to the $2.50ish range. There will be foreign buyers at some point; precisely where is anyone's guess. I simply can't see it going much south of $2.50, but then again... the trend is your friend, and right now copper is falling like an anvil off a table.

Last Thursday there was the beginnings of contagion in Europe; the Greeks were as usual at the top of the mess, but this time the Spanish stock exchange crumbled apart as well and bond buyers demanded more interest before loaning money to Spain and Portugal. Greece and Portugal are small countries; each has ten million or so people.. think Indiana or Georgia in US terms. Spain, however, is a whole other ballgame, with forty million people.. think Texas. The EU by itself could contain problems in Greece and Portugal; Spain is the worry here. Yesterday things calmed down some (after a 9th inning equities rally courtesy of the PPT me thinks, but who's looking), though the European stock markets were still down. Another day or two like last Thursday and the ECB (or someone in the EU) will likely step in and try to contain this before it affects Spain. There was a rumor on ZeroHedge that the ECB would act this weekend at the G7 Summit.. I kinda doubt it. If this was happening in the US, Bernanke would've squashed this bug a week ago, but the Europeans (with sixteen different governments, languages and sets of priorities) are notoriously slow in getting it together.

Wall Street veteran Bruce Krasting's take on this: