Global Macro Trading Journal

Quote from Daal:

What is your evidence there is overcapacity in commodity production?I'm talking direct numbers
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US petroleum usage at mid-1990s levels: http://globaleconomicanalysis.blogspot.com/2012/04/another-plunge-in-3-month-rolling.html

As for industrial commodities, well it's just logical if you buy the thesis that China will slow. It seems self-evident that we're not coming off a period of underinvestment; we're going to really heroic efforts now to find oil (see Brazilian pre-sal), there's been a mining boom in Australia for some years, I saw some predictions that Mongolia's GDP will be up 20% (!) this year due to mining investments, and so on.

Given that China appears to be responsible for most of this demand increase, if China slows then prices will fall and much commodity-related investment will turn out to be unprofitable. This is the same basis behind the AUD short trade which seems to be popular here, though I'm not sure if you agree with it. In any event, if we're not near the beginning of the cycle (which again appears self evident even if you think China will enjoy a soft landing) it seems like going full-bore on commodities doesn't make much sense.
 
Quote from Specterx:

to money supply expansion etc., but gold is a much better way take advantage of this: gold and CRB moved almost in lockstep from 1982-2005 but gold has since outperformed massively.
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Jim Rogers would say all the more reason to buy other commodities then gold.

He also points out like 80% or so of all new mines opened up last decades are gold mines.

Gold is actually his least favourite commodity btw.

Personally I do like gold because:

1: I bought a large position 5 years ago
2: It can stand liquidity tightening better then other commodities.
3: It can't go to zero. Sounds silly but to me crucial.
4: No holding or storage costs. You can get a safe anywhere in the world for 100$ a year.
5: As a Europeaner I have the benefit of a possibly rising USD ofsetting potential losses when gold drops.
6: It can't be sold with one click. as a very impulsive person to me this is a plus.


Risks are:

1: Is it safe where you store it? Daal had a newsbite a while back about a bank being robbed and safes opened.
2: Can be confiscated, forbidden.

The risks to me are reasonable and fall in the category of: what if my bank goes broke, what if the Euro collapses, what if my country goes bust...

Extremes that should be taken into account but not all decicive.

I think it is a very difficult question, say you are absolutely convinced oil or soybeans will go trough the roof, how do you play it? Not easy.
 
Quote from Daal:

As far as credit growth is concerned, most of the credit during the 2000's went to housing, consumer spending, student loans not corporate spending. I haven't checked but I'm pretty sure the Fed flow of funds report back this statement
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Two points:

1) Austrian theory predicts that lowering the interest rate (such as when CB sets it artificially low) leads to increased investment in higher-order (earlier) stages of production. Resource extraction and mining are of course among the highest-order, longest-duration and most capital-intensive production activities, so we can expect that the credit boom prompted a lot of investment here that will eventually be written off - more so than consumer goods producers.

Empirical evidence can be seen here: https://research.stlouisfed.org/fred2/graph/?graph_id=38989&category_id=0#. Ratio of business equipment to consumer durables production with both indexed to 1947; note what happened after the credit system became unanchored from gold in 1971 vs. the prior decades, also note how the ratio increases during booms (more investment being drawn to higher-order goods) and decreases in busts/recessions (malinvestments being exposed and liquidated).

2) That issue aside, regardless of where the credit entered the economy it surely increased the demand for commodities. The cars, houses, and iphones/ipads bought on credit had to be manufactured before they could be sold. Some of the student-loan money goes to fund new buildings or luxury yachts for the university president, etc.
 
Quote from ralph00:

p.p.s. now up 700 bps :cool:
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Indeed -- and if you held on through that hairball two-week ride, and earnings to boot post parabolic trend-break, then hats off to you sir (I think) :)
 
Quote from darkhorse:

Indeed -- and if you held on through that hairball two-week ride, and earnings to boot post parabolic trend-break, then hats off to you sir (I think) :)
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"We should wish for IBM's stock to languish throughout the next 5 years." ... Warren Buffett in his latest annual report.

Anyone who can drill this concept as deep into their bones as Buffett has, might just make a few dollars buying common stock over their lifetime.
 
I posted a while back about the Rosenberg ISM system that buys when it is at 40 and sells at 60 and how that could generate excess returns. I asked if anyone had seen numbers of returns using the VIX in a similar fashion

I remembered VN done some calculations on that. Here are the results from this book Practical Speculations(Buy with vix at 30, sell at 25):
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He also quotes a study that says
"Thus, given a normal VIX reading of 25, if VIX goes up to 35—10 percentage
points above the norm—the S&P can be expected to rise 1 percent
extra in the next 10 days. Conversely, when the VIX falls to 15 percent, the
S&P can be expected to perform 1 percent worse than its normal move."
 

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Its important to remember that his results were done during the Great Moderation, now during the Great Deleveraging I suspect the numbers would go up(instead of 35, one would buy at 40 or maybe higher and instead of 15 one would sell at 20, etc)

VIX was bellow 15 a few weeks back and is still quite low(18). A 1% negative edge over 10 days, is about -43.7% CAGR or -36.5% annualized
 
Quote from ralph00:

"We should wish for IBM's stock to languish throughout the next 5 years." ... Warren Buffett in his latest annual report.

Anyone who can drill this concept as deep into their bones as Buffett has, might just make a few dollars buying common stock over their lifetime.
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Okey Dokey. So if AAPL goes back to $400 you'll be ecstatic?
 
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