The ACD Method

Maverick74 said:
If you are asking about the commodity trade, there is a very clear pattern that late in the bull market as growth starts to peak you get very strong runs in commodities. This makes sense if you think about it from a production standpoint. At some point in the growth cycle you get pricing pressure from your inputs. This coincides with the last leg up in stocks and GDP growth. Firms still have pricing power to raise prices and wages follow. This forces the FED to respond by raising short term rates. At some point the rise in rates and the rise in commodity prices put pressures on margins which eventually caps growth and ends the credit cycle expansion. But commodity prices stay strong even going into the recession. This is purely from the standpoint of supply. So the first leg up in commodities is demand driven from strong economic growth, the 2nd leg up is supply driven. This is why they keep going up even as demand wanes. This is pretty much the theory Jeffrey Gundlach makes. Even if we are still 2 years out from a recession, the commodity bull has begun. It's a win win trade.

This means you want to be long oil, copper, steel, aluminum and short the dollar. Also short bonds. I see no reason why the dixy can't trade back to a 7 handle which could put the Euro north of 1.40 and the Pound back above 1.75 and the Aussie near parity. Oil is probably on it's way to 100 (at least Brent) and Copper back above 4.00.
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this post got my attention!
 
SteveM said:
It seems like everyone loves this relentless bid in US stocks - returns don't look so hot when ex-USD denominated...
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We have about another 18 months left in this credit cycle. So expect stocks to make new highs and probably blow off sometime in 2019. The last legs in bull cycles tend to be pretty violent to the upside but you also get a lot higher volatility. So this will be the best trading environment we have seen in probably a decade.
 
Maverick74 said:
So I'm guess I'm the only one that listened to the webcast. I thought it was outstanding. I'll try to review the main points here. While Gundlach wants to believe this bull market is nearing an end and that a recession has to be on the horizon sooner rather then later, he sees no empirical evidence that a recession is coming in the next 12 months. He does believe this bull market is late cycle and make some excellent comments about the most optimal way to play it. He made a strong bull case for commodities and anyone with access to charts can see the commodity bid. More importantly he showed the evidence that historically there are strong bull commodity runs in the late stages of credit cycles. This trade looks like a win win. If economic strength continues longer then it should, commodities are cheap from a valuation perspective. In fact, relative to stocks they have not been this cheap since the early 1980's. If doom and gloom is closer then we think, then it's likely we will see explosive gains in commodities. Either way, he believes (and I agree), that commodities will outperform equities.

Other comments, yes, he thinks rates will end the year near the higher end of the range. He's bearish on Bitcoin, bearish on the dollar, expects a strong first half in equities and a bearish 2nd half. Still likes emerging markets. Seemed indifferent on the 2/10s steepening or flattening. Presented a lot of nice charts on various economic indicators. Almost none of them pointed towards a recession in the next 12 months.
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Slides from Jeffrey Gundlach's 'Just Markets' webcast can be found here:
http://uk.businessinsider.com/jeff-gundlach-webcast-slides-just-markets-2018-1?op=1/#-45
 
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Anyone watching lumber prices? Other than King of course. :)

fut_chart.ashx
 
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