The Final Trade

S&P Trading at 1700?

2012-03-21T21:25:00.000+10:00

S&P 500 Trading Higher

The last month or so has seen the S&P grind slowly higher amidst incredibly low volatility. The VIX touched a four year low earlier this week as it closed below 15, and all the while the S&P is only trading in one direction – upwards. A recent forecast had the S&P reaching 1700 by year end, which would certainly put it at the top of the range of estimates, so I thought it’d be worthwhile to take a look at how the S&P could possibly take out such a high level in just 9 months.

Uranium Prices Going Higher?

2012-03-11T16:47:00.000+10:00

What’s Driving Uranium Prices?

Uranium prices used to be the talk of the town – the commodity with perfect fundamentals and massive profits from those trading uranium miners – but in more recent times it’s practically dropped off the face of the earth. Or is less advantageous to remove anyway. The price skyrocketed from $20/lb in 04/05 to $135/lb in 2007, but was crushed during the global financial crisis, and then again by the Japanese disaster and investors shied away from riskier commodities. So is this the end for the uranium mining companies? Just because they're always impressive, here's the Ranger Mine in Australia.

Gold Price Volatility

2012-03-02T20:17:00.002+10:00

Gold Price in a Liquidity Trap

The gold price was in focus this week, recording some unusual volatility levels, and giving trading models all over the world a good workout. Front month volatility in equity markets is grinding lower once again, although the later months have shown no signs of declining, suggesting the market isn't rife with complacency just yet. And why would it be? A liquidity vacuum on Wednesday drove precious metal prices lower by 5%, but if you were caught in it at least be reassured by the fact that it no doubt hurt Paulson far more than you.

Nikkei outperforming Australia

2012-02-21T20:16:00.001+10:00

Nikkei to outperform

Finally, after many months of Europe toying with markets, Eurozone leaders reluctantly decided to bail out Greece. Or at least that’s what they want people to believe – that this can’t continue, bailouts aren’t to be taken as standard, moral hazard etc etc. In reality, a bailout was always likely to happen, as the panic that would sweep through markets if they believe larger nations such as Italy wouldn’t receive funds would be crippling. They were lucky to get away with relatively minor reductions in future interest payments, though they’d have you believe they were tough enough to avoid real concessions that would create a bad precedent.

VIX set to Spike

2012-02-15T20:09:00.001+10:00

VIX to Increase Short Term

For those that don’t know, the VIX represents the implied volatility expected to be realised in the S&P 500 over the next 30 days, and is also known as the ‘fear index’. For those that already know this, you’ve probably had a few fearful days trading the spikes recently, as the mini contracts as about as small as Jeremy Lin.

US Inflation Waiting to Spike

2012-02-12T11:36:00.002+10:00

US Inflation Waiting to Spike

Apologies for the lengthy delay between posts recently. Relocating can be stressful at the best of times, but all should be well now. Apart from the medium term US economy that is. The world has a history of overlooking signs of impending doom, and whilst US debt levels aren’t doomsday material just yet, they certainly have the ability to cause a serious problem if they are not reigned in soon. The amount of money to be made in the US economy as a trend follower during the GFC, as supposed to a blindly optimistic follower, was phenomenal. I would have to kidnap John Paulson every single day for the next four years (to get his kidnap insurance of $10m) in order to make what he made during the GFC. A background is here for those that want it.

Trading Blog Update

2012-01-31T00:08:00.001+10:00

Trading Blog Update

Although the purpose of this trading blog isn’t to have people buy everything I’m bullish on and sell everything I’m bearish on, many seem to find it useful to keep track of what an author’s trading views are at that time. Therefore I always try to list a couple of things I’m buying or selling at the moment (or looking to be), but I try not to include size of positions, risk element, profit expectations etc – just a broad overview to be taken as hearsay and nothing more. Regardless, I thought it might be good to take a quick look back and see how some of the early calls have gone, and where they might be heading:

Silver Price - Boom or Bust?

2012-01-23T17:39:00.001+10:00

Trading Silver – Boom or Bust?

The price of silver has been unusually volatile this last year, with some calling for the bubble to collapse and others predicting silver prices to reach $50 per troy ounce in the medium term. My mood is certainly more silver than gold this week (with bronze being the only worse alternative), so please excuse my complete lack of humour, but hopefully my focus remains intact.

Copper Price Signalling Growth

2012-01-17T09:55:00.006+10:00

Copper Signalling Growth Ahead

Copper prices are often seen as a leading indicator of global growth, not dissimilar from the relationship between partner and Christmas which states that the earlier your partner asks what you’re getting them for Christmas, the bigger present they expect on the day. If you fudged the latter, don’t ignore current copper prices and read on.

Forex Trading - USDJPY

2012-01-13T17:20:00.002+10:00

Trading Forex Pairs

Never before has it been such a blessing to be trading forex pairs that rely so heavily upon their fundamentals. Whilst the Euro and USD are whipsawing with every conflicting news/spin story, the Japanese Yen is maintaining its safe haven status, and its economic fundamentals show no signs of changing anytime soon. European politicians are still making my goldfish look intelligent – politicians are swimming in circles without realising the solution (food) is right in front of them – but then again my fish doesn’t face the fear of being voted out of its tank. Though not directly related, I think John Cleese’s piece early last year summed it up perfectly: http://marionvalentine66.wordpress.com/2011/01/23/new-european-terrorist-alerts-by-john-cleese/. Completely politically incorrect, and therefore well worth a read.

Hedging your Mortgage Rate

2012-01-09T23:51:00.002+10:00

Can you hedge your mortgage rate?

So you’ve gone for the floating mortgage rate. Seems cheaper at the time, right? In Australia, floating mortgage rates are around 6.6% and 7.6% for a fixed mortgage rate. Over in the US, the mortgage rates are more like 2.6% for a floating mortgage rate and 3.6% for a fixed mortgage rate. Firstly, yes us Australians appear to get a raw deal, and should move overseas. Everything about the cost of living in America has convinced me of that. But secondly, it doesn’t take long (potentially just a few months) for your new floating mortgage rate to be equal to the fixed mortgage rate when you originally signed up.

Bank of America vs. Commonwealth Bank

2012-01-06T08:48:00.002+10:00

Bank of America vs. Commonwealth Bank

In the US, Bank of America (BAC) and its friends have struggled. Only recently has it emerged that the retail side of their operations is performing better amidst struggling trading revenue, but stock prices are still down over 50% from their 52 week high. These banks are high growth stocks, if you pick them up ~~in 2008~~ at the right price, and therefore Bank of America is paying a measly 0.01 cent dividend. No guarantees, just a rollercoaster ride into rags or riches.

Gold Miners vs. Gold Price

2012-01-03T20:05:00.001+10:00

Gold Miners vs. Gold Price

Recently I had the choice of buying a new mobile phone, and being a trend follower, I came to the logical decision between a Blackberry and an iPhone. A year on I can’t help but notice how overpriced the former was considering the functionality, reliability and versatility of the other option, according to those who chose the iPhone anyway (and my Blackberry experiences). RIM are undoubtedly losing market share to Apple, and in hindsight the RIM team do seem to be pricing to a high end consumer that has since defected to a superior product.

Gold miners and the spot gold price are bearing a similar, yet totally opposite resemblance to this analogy, as the ratio of gold price : gold stocks price has risen over the course of the year. Gold miners are pricing in a low gold price that hasn’t existed in two years, and unlike RIM smartphones, are seriously undervalued. The two picks of the Australian equities are undoubtedly Newcrest (NCM, down 22% for 2011) followed by Kingsgate (KCN, down 43% for 2011), and overseas Newmont (NYSE NEM, flat) and select gold stock ETF’s also offer value in comparison with gold’s 16% increase over the same period.

US Treasury Notes Short Trade

2011-12-26T19:24:00.001+10:00

A well known philanthropist (John Paul Getty) once said “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

US Treasury Note Trade

The sooner European politicians read this quote and look in the mirror, the sooner the risk on trade will be back in force. Until then, we could either see their continued failure to accept their lack of responsible lending (and monitoring of recipients), stifling any rallies, or a continuation of the ‘fix the symptoms not the disease’ solutions that may buy them time, but is unlikely to benefit anyone’s retirement funds but their own. Fortunately, 10yr US Treasury Notes are yielding below 2%, from above 3% before June, largely due to their safe haven nature rather than US fundamentals. My view is that the next 6-12 months will be the optimum time to be short US Treasuries, with any entries below 2.1% being favourable, and it’s not because I think high yields will be the result of a European recovery.

Introduction to my Trading Blog

2011-12-26T18:54:00.001+10:00

Hopefully this blog will prove to be useful for the majority of readers, none more so than myself, as it aims to structure my trading ideas, experiences and challenges and convert them into useful trading strategies and ideas for both myself and any readers. I’ll try to be a little more light-hearted than most trading or stock blogs and press out there (it’s unlikely I’ll cross over into funny though) as there will always be more knowledgeable people out there, but hopefully the ideas presented here will be more enjoyable to read.