March 11, 2011
Here are some brief updates of the markets I am currently recommending…
Short Gold and Silver
And Silver? Gold effectively reached its highs around the $1400 level last October, but Silver, which I assure you, does NOT lead or set the tone for the precious metals, has gone up almost another 50% in value…Silver is the “poor man’s gold”, meaning it’s what you trade if Gold is too expensive for you to consider…GOLD LEADS SILVER, NOT VICE VERSA…and to me, the fact Silver is still soaring higher is just one more indication that this bubble is ready to collapse. Maybe I’m just a dumb broker stuck on “Sell” but I think $36 Silver is just stupid…that there is a potential small fortune to be made on the short side while Silver loses 40-50% of its value. I would almost say this may be the most severely over inflated and overvalued commodity market I have ever seen.
I would also add…If you are a farmer intending to raise Corn and have NOT started locking in your 2011 production, I would strongly advise getting this done. Do NOT sit there and wait for December to trade up to anything close to what old crop has done…And do NOT sit there and be hoping for some sort of miracle rally that takes December back up over $6.00 and give you “one more chance”. That’s exactly what everybody else is wishing for…and that is not how the markets work…fulfilling every farmer’s dream…
Short Soybean Oil
I still think Short Soybean Oil is an incredible option trade…whether you just want to buy puts or use the “2 and 1”…with tremendous leverage…I see this market as having several classic elements of a top and fully expect to see it come off a minimum of 30-35% before we get to the end of summer…And do NOT suppose that just because I spent several years being short this market while it went sideways means I will be wrong again…I DO THINK THIS IS A BIG TRADE.
The following excerpt and chart are from my Feb. 23rd newsletter…
A new one…Cattle
With my overall bearish commodity attitude, this will probably be a surprise, but I think the Cattle market has a shot at the same sort of lunacy we have seen in Cotton...as in going parabolic on the upside…With all the fears of higher energy prices, there is a general theory that consumers will not have the disposable income to afford luxuries such as beef…therefore the overwhelming majority of opinion I see is trying to call a top in the Cattle complex…Without going into all my reasons, under the present overall market circumstances (fear of oil prices damaging the consumer), if Cattle can make a new high, I would say the odds are quite strong this we could see a potentially mind boggling move up from there…
I said I wanted to get long if Cattle could make a new high…and they have done just that…Here’s the updated chart…and my recommendation…
THE TRADE FEW OF US EVER MAKE…GETTING ON SOMETHING AFTER IT HAS BEEN MOVING FOR A LONG TIME…
Or do this contract…using the Feeders…of which it is sometimes said, “Feeders are the leaders” (in Cattle).
Enough for one day…except to reiterate from yesterday’s newsletter on Bonds, I think Treasuries are absolutely about to take off…
Give me a call if anything here interests you…And if you know anyone who might have the risk tolerance for futures and might be interested, please pass this along.