The doctor is IN

D

drsteph

I enjoy writing on ET - it really helps me to crystallize my thoughts by putting them down on the BBS.

I've been posting about 18 months now, and I've come a long way in my thoughts, done some serious reading, and am trying to formulate a plausible long-term macro view to guide my trading.

I'll post briefly now & continue in some more depth later, but here are my main beliefs and tenets as I have come to understand them.

1. Demographics is the root of most everything.

2. The 'china effect' will dominate for the next 20 years.

3. There are strong deflationary tendencies in the market due to #1 and #2.

4. Global Geopolitics is aimed at maintaining borders, increasing the rule of law, and economic growth may be sacrificed for those goals.

5. We have narrowly missed or postponed a severe economic crisis from 2000-2002, but may not be fully out of the woods yet.


I post a bit, but since I rarely flame, I don't get a lot of responses to my postings. I do like a dialogue, and would enjoy being challenged as it helps me to sharpen my viewpoint, so as long as you are factual and constructive, feel free to call me full of shit.
 
Okay Doctor,

I have a theory (I do not believe that it is entirely true but I rather use it to provide a frame work for my thinking) that Chinese demand for commodities was driven by the building of infrastructure. This includes highways, steel factories, urban housing and of course that big dam. There is a rush on in part because of the Olympics and trying to complete a five year plan. This infrastructure will last twenty years plus and is over built for current needs.

This means that Chinese demand for commodities will wane, especially non-energy commodities. Combine this with limited money supply creation in the U.S. and I predict a bear market in commodities.

How valid is my theory in your opinion.
 
My understanding of the whole China situation is that the country needs to build an equivalent of a major US city on a monthly basis or so to accommodate its population.

China's demand for building materials is important because of a massive need to house its population. Increasing wealth in the country will lead its population to want better housing, and since China's politics are of the "keep them happy so we can keep power", I think they are going to do that.

Many other raw materials are needed for export to the US & other consumers. If demand dries up from the US or elsewhere, you can expect those commodity prices to fall.

I haven't yet puzzled out the whole commodity thing yet. Commodity prices , to my knowledge, had been in largely a severe long-term bear market from the effects of globalization & production technology. I find it difficult to believe that China will need so many commodities that it will skew prices permanently higher. In general, I am a long term commodity bear, but certain commodities, such as oil, gold, silver, palladium, lead I think will behave differently and all bets on those are off.

Oil and China are special case scenarios - I'll go into that much more in detail in a later post (my fuel cell theory).

I don't agree that money supply creation in the US will be limited. I think that money creation will be rather aggressive under Bernake to hit prescribed inflation targets (to avoid deflation). However, negative influences on that will be credit crunches and recessions.

So I think you are mostly right with some exceptions about declining commodity prices. I however think that the M series indicators will be continuing to grow, with resultant effects upon the FX rates as well (i.e. dollar long term macro down)
 
Interesting points, and I think I agree with many of them, but I'm not sure how helpful this long-term of a view is helpful in day to day trading. How long do you hold positions? I hold 1 to 5 weeks usually, and I don't really look this far out on the horizon.

Maybe I should. :cool:
 
Quote from Agyar:

Interesting points, and I think I agree with many of them, but I'm not sure how helpful this long-term of a view is helpful in day to day trading. How long do you hold positions? I hold 1 to 5 weeks usually, and I don't really look this far out on the horizon.

Maybe I should. :cool:
More...

I'm in the 1-6 month time frame for many of my plays, with some of them potentially lasting for as long as the trend looks like its going to be viable. I would have no problem with holding a particular position for 1-2 yrs if it made sense. More than that I find difficult to reason.

Keep reading to decide if this will be useful to your trading. I think it is, unless you are a strict scalper closing out your positions at the end of the day. That type of trading, while I've done it, I just find more of a grind and don't care to participate in it. To each their own.
 
Quote from zf trader:

Okay Doctor,

I have a theory (I do not believe that it is entirely true but I rather use it to provide a frame work for my thinking) that Chinese demand for commodities was driven by the building of infrastructure. This includes highways, steel factories, urban housing and of course that big dam. There is a rush on in part because of the Olympics and trying to complete a five year plan. This infrastructure will last twenty years plus and is over built for current needs.

This means that Chinese demand for commodities will wane, especially non-energy commodities. Combine this with limited money supply creation in the U.S. and I predict a bear market in commodities.

How valid is my theory in your opinion.
More...


You only have to go to China and see what is happening to realise this notion that China has overbuilt infrastructure is false. Overbuilding is occuring in condos etc., but in terms of infrastructure like highways, railways, airports etc. they are in continual catch up mode.

The highway from Shanghai west through Suzhou was built with 4 lanes either way - its full with traffic already. They could have built it double the width and I guess it would have been full already.

Factories are everywhere - you drive from Shanghai to Nanjing (several hundred kilometres) and the whole way is factories. Turn north or south off this road and travel for another hundred kilometres - factories all the way. Go to a place like Chongqing - and you guessed it - factories out the wazoo.

China is just getting up a good head of steam - its scary what the effect is will be on the world financial and natural environment.
 
A family friend from Toronto is in China on business. Talked to him recently. This is true: He said, "on my way from the airport to the hotel my taxi driver stopped on the side of the road to take a shit. Then he got back in the car like nothing had happened and continued to drive to our destination." He said this is very common in China. This is why i eat only sashimi, no rice. Please continue. This thread and OP is refreshing. Sorry for the graphic details. Just thought it was interesting.
 
Quote from Cluseau:

A family friend from Toronto is in China on business. Talked to him recently. This is true: He said, "on my way from the airport to the hotel my taxi driver stopped on the side of the road to take a shit. Then he got back in the car like nothing had happened and continued to drive to our destination." He said this is very common in China. This is why i eat only sashimi, no rice. Please continue. This thread and OP is refreshing. Sorry for the graphic details. Just thought it was interesting.
More...

Ive done that myself - if you have ever been inside a toilet in a Chinese rest stop or service station you will understand why. There is possibly no more toxic place on earth.
 
I'm a creepy old man and in the past 40 years nothing I expected actually happened. The markets are unpredictable. Remember the stock market crash of 1987? The crash caught lots of professionals by suprise. So don't get excited about this China stuff. Or the big USA debt problem. Or the war. Or high oil prices. The world is the same way it always was. Scrambled. With bacon and toast.
 
Wow... when I said you could call me full of crap, I didn't expect the thread to become a discussion on chinese defecation habits. Won't bring up that topic again!

to hook - yes, you cannot predict the unpredictable. But think back to the '87 crash, and the mini crash back in 90.

If your fundamental, technical, and sentiment analyses were correct, and you could fade the noise, you would have realized them for what they were - opportunities to get long that you may have missed.

Its that situation that I am specifically looking for - the correct position which is temporarily scrambled for stupid reasons.

Seems like there is a lot of interest on the china topic here, so I'll make my first post on that topic. You may have to wait until the weekend though.
 
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