December 2, 2009
Here are two one-way trades (not “2 &1’s”), that I believe are basically identical in “mood” to the stock market back in March when it looked and felt like the world was coming to and end…and the last recommendation you were seeing anywhere (in general) was, “Buy the hell out of stocks!”…But that’s exactly what you were supposed to be doing.
You KNOW what the seemingly unanimous opinion is in the Dollar…Going to zero. Nothing can keep it from going down…It’s gotta go down!
I’m stupid. I cannot imagine that six months from now people will be looking back and thinking, “Boy, all the talking heads were FINALLY right for once”. I think the dollar is a roaring, screaming buy. Where it will be in six years, who knows? Where it will be in six months? I think at least 10-15 points higher, or $10,000 to $15,000 per futures contract.
I think a lot of people will be looking back six months from now and saying, “I KNEW I should have done something with that Dollar. In retrospect, how many times do I have to see the whole world bleating the same thing to understand that is precisely when you go the other way?”
Especially in this market, in which Alan Greenspan essentially said, “Everybody is always wrong”.
Buy the Dollar Index. Pay for the time and Buy the June 2010 Dollar Index Calls. Today.
Buy Gold Puts
And Gold has reached the “gaga” stage…The thing about a market like this, that HAS JUST GONE STRAIGHT UP $200 IN THE LAST MONTH, is the idea of shorting it generally scares the crap out of anybody with any sense at all…But fear is what reigns at any top…especially one the public is quite aware of (as opposed to something like Rice futures, for example)…Selling into something like this just looks stupid…but that’s where options can be a tremendous vehicle…You put your money on the table, you buy the time…and if you are right the profit can be a big one…and yes, if you are wrong, you can lose up to 100% of what you spent.
I had a client tell me today he passed a dry cleaners that had a “We Buy Gold” sign out front…I mean really...Who doesn't know about this trade? Everybody who could possibly "need" to be in this must already be there...I have no idea where Gold will be 5 years from now (though I suspect a lot lower) but within the next six months, I do think it could easily see $700-$800 an ounce.
Right here…today…NOT, "Let's see what happens", I like working with the April 2010 contract that has 146 days left to trade…I think a $200-$300 downswing in this market would be nothing right now…I’m sure you’ll hear stuff like, “$1000 is support”, but it wouldn’t surprise me to see Gold under that “support” before we even get to the New Year… This is a volatile market…
There are no absolutes in futures but many markets tend to go down a lot faster than they go up…and Gold is definitely no exception to the rule.
Roughly two thirds of the demand for gold is for JEWELRY…And just like housing prices got “stupid” several years ago, so can it be with gold jewelry…And however pretty it is, my guess is a lot of people can live without that new gold bracelet…
Inflation? Check this out…
And what would a newsletter be without Soybean Oil?
Give me a call if you want to do any of this…
Over and out…