Soybean Futures Soar on Inflationary Buys
November 7th, 2007Via: FXStreet:
Chicago Board of Trade soybean futures ended sharply higher Tuesday, rallying to 3-year highs on speculative led buying tied to inflationary fears.
November soybeans settled 23 3/4 cents higher at $10.29 1/2 and January soybeans ended 23 1/2 cents higher at $10.44 1/2. December soymeal settled $7.70 higher at $284.60 per short ton. December soyoil finished 106 points higher at 43.62 per pound.
A dearth of fresh fundamental news kept traders focused on outside influences, with soaring metal futures, record high crude oil prices and weakness in the U.S. dollar promoting broad-based commodity wide buying, said Vic Lespinasse, an analyst with Illinois Grain.
The market will probably stay focused on outside influences until the release of fresh fundamental data in Friday’s U.S. Department of Agriculture crop reports, he added.
EMERGENCY: DOLLAR EXTENDING VERY STRONG DECLINE, OIL $98
November 7th, 2007Via: Bloomberg:
Crude oil rose above $98 a barrel for the first time in New York as the dollar tumbled to a record low against the euro and a storm disrupted output in the North Sea.
BP Plc and ConocoPhillips evacuated oilrig workers, adding to concern that supplies may be insufficient. The U.S. Energy Department is set to report today that inventories fell for a third week, according to a survey of analysts.
“The weakness in the dollar is giving investors the chance to buy oil at a cheaper price,” said Tetsu Emori, a fund manager at Astmax Futures Ltd. in Tokyo. “Any further declines will only push oil higher.”
Crude oil for December delivery gained as much as $1.33, or 1.4 percent, to $98.03 a barrel in after-hours electronic trading on the New York Mercantile Exchange. That’s the highest since trading began in 1983. It traded at $97.91 at 11:32 a.m. in Singapore. Futures have gained 66 percent in the past year.
Yesterday, oil rose $2.72, or 2.9 percent, to settle at $96.70 a barrel, a record close.
The dollar’s decline increased the attractiveness of commodities as alternative investments. A weaker dollar reduced the costs for buyers paying in other currencies.
The dollar slumped to a record low against the euro on speculation interest rate cuts by the U.S. Federal Reserve will prompt investors to buy higher-yielding currencies.
The dollar declined to $1.4666 per euro at 11:31 a.m. in Tokyo, the lowest since the 13-nation currency started in January 1999, from $1.4557 late yesterday.
Gold New High: $830
November 7th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
The shorts are being decapitated right here. I’ve got the chart open right now. No stories yet. If the shorts tap the mat and start to cover… Well, the chart will be suitable for framing.
Even more suitable for framing, I should say.
UPDATE: USDX Takes Out 76 On the Downside
Printing 75.97.
Overshooting??? I guess we’ll find out soon enough.
UPDATE: I Have to Go Milk a Cow Now, Gold at $835
This is all very exciting and gold is now printing at $835, but I have to go milk a cow now.
Best of luck to all!
Possibly More Good News for Gold Bugs: Sentiment Remains Lukewarm
November 7th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I’ve speculated that maybe we were seeing the public participation phase on gold. Well, maybe not.
Maybe not even close.
Excellent article here. Sums up a lot of late breaking information, and previous concepts covered on Cryptogon re: contrarian indicators.
Via: Seeking Alpha:
John Dizard, writing in the FT Monday, (‘Treading the foothills of a gold bull market’ ) outlined why he believes that we remain in the early stages of the gold bull market with a long way to go yet. Primarily this is because the mass of investors have yet to partake in the gold bull market and because the Fed is going to have to reinflate further which will be bearish for the dollar and as gold remains an important monetary instrument it will be bullish for gold. “So, even at about $800 an ounce, the real gold bull market has not begun.”
Despite gold reaching new record 28 year highs above $800 the sentiment towards gold remains lukewarm at best. Most of the UK, Irish and international financial press and media barely covered or ignored this significant development at the weekend. This, and the fact that the investment public remain unaware of the gold price and the merits of investing in gold are classic contrarian indicators which show that gold remains in the early stages of its bull market. When gold is covered as headline news in newspapers on a daily basis and articles appear regularly about the merits of investing in gold and how to invest in gold, then it will be the later stages of the bull market and an indicator that it may be time to sell. When stockbrokers start telling their clients and the wider investment public to buy the gold ETFs, it will be time to sell. When there are gold and commodities supplements alongside property supplements in major newspapers it will be the time to sell. When the topic du jour on the dinner party circuit is “how great my gold investments are performing,” it will definitely be time to sell.
Bull markets end in mass participation and mania and we are a long way from there yet. Besides this obvious lack of animal spirits and wholesale bullishness towards gold, it is also important to remember that gold remains undervalued. Gold will have to at least reach its inflation adjusted high of $2,200 per ounce (as oil and many other commodities have already done) before it could be considered fair valued or over valued.
Boris Sobolev of the Resource Stock Guide wrote perceptively: “What if, however, we are wrong and gold is now, in fact, making a final spike to its all time high of $850 or higher. The aftermath, as after the top in 1980, could be severe and it would be time to sell? Is this a real possibility?”
No, the situation today is completely different:
• In August 1979, Paul Volcker became the chair of the Federal Reserve and started to fight inflation by radically raising interest rates. Today, Chairman B. Bernanke, in an effort alleviate the pain in the ailing banking system, is aggressively lowering interest rates. • 28 years ago, the United States was the biggest creditor nation in the world. Now, the opposite is the case – U.S. is the largest debtor. This, along with the Fed policy, is causing the dollar to fall to historic lows.
• Gold may appear to be overextended but this is not the case in real terms. In fact, gold should be around $3,000/oz in order to reach its inflation adjusted highs. Only then will there be a real reason to worry about a possible end of the gold bull market. We reiterate that the gold bull market has a long way to go. Don’t be afraid to miss the boat – there are many opportunities ahead. Hold your positions and buy the dips.
Foreclosure Wave Sweeps America
November 6th, 2007Via: BBC:
A wave of foreclosures and evictions is about to sweep the United States in the wake of the sub-prime mortgage lending crisis.
This could destabilise the US housing market and may also lead to further turmoil in financial institutions, who collectively own $1 trillion (£480.6bn) worth of sub-prime debt.
Cleveland, Ohio, is an industrial city on the banks of Lake Erie in the US “rust belt”.
It is the sub-prime capital of the United States. One in ten homes in the city is now vacant, and whole neighbourhoods have been blighted by foreclosed, vandalized and boarded-up homes.
Many of these homes are now owned by the banks and investment pools owning the mortgages, and the company making the most foreclosures in Cleveland is Deutsche Bank Trust, which acts on behalf of such investment pools.
Cleveland is facing a rising crime wave, and the cost of demolishing the vacant houses alone will cost the city $100m of its tax base.
EMERGENCY: DOLLAR
November 6th, 2007Europe might try to stop it here. EUR/USD over 145 is an emergency situation for them. I don’t know what their plan is, but expect them to try it soon. USDX is a hair over 76. They’ve got to do something right here.
Via: Bloomberg:
The dollar fell to a record low against the euro on speculation financial-company losses from subprime-mortgage defaults will grow, prompting the Federal Reserve to cut interest rates a third time this year.
The U.S. currency declined versus all 16 of the most- actively traded currencies except the yen after Fed Governor Randall Kroszner said conditions for subprime-mortgage borrowers may worsen. It dropped the most against the South African rand, falling 1.2 percent.
“The dollar will continue to weaken because the rate differentials move against the dollar,” said Marcus Hettinger, a currency strategist at Credit Suisse Group in Zurich. “The subprime issue is negative because it increases the probability that the Fed will ease again.”
The U.S. currency dropped to an all-time low of $1.4556 per euro before trading at $1.4547 as of 7:03 a.m. in New York, from $1.4469 late yesterday. The dollar may fall to $1.46 in the coming days, Hettinger said.
Against Australia’s currency, the dollar declined to as low as 92.66 U.S. cents, compared with 92.07 late yesterday in New York. The U.S. currency fell to 92.59 cents against its Canadian counterpart, from 93.33 cents yesterday, and to 6.5013 rand, from 6.5900. It was at $2.0878 against the pound, near a 26-year low of $2.0897. The dollar traded at 114.72 yen, from 114.55 yen.
Dollar Assets
“Conditions for subprime borrowers have the potential to get worse before they get better,” Kroszner, the Fed’s chief liason officer with the banking industry, said in remarks delivered to conferences in Arlington, Virginia and Washington yesterday. Bank of England Governor Mervyn King said today in a BBC Radio 4 interview it may take months before commercial banks publish their full losses from the U.S. subprime-mortgage slump.
“The rolling credit crisis and lack of confidence in the U.S. financial sector is heightening fears for the broader U.S. economy,” said Greg Gibbs, a currency strategist in Sydney at ABN Amro Holding NV, the biggest Dutch bank. “The broader outlook for the dollar still looks very challenged.”
Gold Bulls Gain Momentum
November 6th, 2007Gold has broken up and out of its 1 hour channel. The dollar is falling apart even more.
Via: Reuters:
Gold futures traded at their highest level in nearly 28 years on Monday, as renewed turmoil in the credit markets boosted the metal’s safe-haven appeal after Citigroup said it will have to write off up to $11 billion more in losses.
Markets Fear Banks Have $1 Trillion in Toxic Debt
November 6th, 2007Via: Financial Times:
A new phase in the credit crunch, one of “$1 trillion losses†seems to be dawning. The crisis at Citigroup and renewed doubts about some of the world’s leading banks disquieted stock markets on both sides of the Atlantic yesterday, with the fractious mood set to continue.
The FTSE 100 fell 69.2 to 6,461.4, with Alliance & Leicester (down 4 per cent) and Barclays (off 3 per cent, to a two-year low) singled out for punishment. In New York, Citigroup, down |4.9 per cent to multi-year lows, weighed on the Dow Jones index, which fell 51.7, or 0.4 per cent, to 13,543.4. Merrill Lynch, Goldman Sachs and Lehman Brothers also dropped on speculation they face more writedowns on top of the $40bn (£19bn) announced in the past four months.
Bill Gross, the chief investment officer of Pacific Investment Management, said US mortgage delinquencies and defaults would rise in 2008. “There are $1 trillion worth of sub-primes, Alt-As [self-certified] and basically garbage loans,†he said, adding that he expects some $250bn in defaults. “We’ve only begun to see the pain from rising mortgage payments,†he added. Brian Gendreau, an investment strategist at ING, commented: “Financials are 20 per cent of the S&P 500 and if that sector doesn’t do well all bets are off. People just don’t know what’s on the balance sheets.â€
The banks remain unwilling to lend to each other, preferring to rebuild their balance sheets and “hoard liquidity†to buttress themselves against any shocks from repatriating off-balance-sheet losses from their special investment vehicles (SIVs). However, this tightening up has led to a vicious circle. Making credit tougher has exacerbated the problems of struggling mortgage holders in America; default rates then rise and make the banks even more exposed to losses as credit agencies downgrade their assets. This seems to be what happened at Citigroup. The admission that it was unable to assure investors that a potential $11bn write-down for sub-prime mortgages would not grow has led to this fresh fit of extreme nervousness. Huge write-downs by Merrill Lynch ($7.9bn) and UBS ($3.4bn) have not helped.
Investing in Oil, Food, Alternative Energy, Gold or Water? Yes, All of the Above
November 6th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
Over a roughly 24 hour period, I received four emails from readers with questions about investing in oil. (Has there been some specific event in the media that has touched off a lot of interest? Just curious. I don’t have a TV so I don’t know what people are being fed on that thing.)
The tactical calculus on oil is extremely difficult. Forget any fundamental analysis of the thing, because the people providing the numbers simply lie about their reserves. Peakers will tell you that the companies and countries involved are lying about how little oil they have, but only an idiot would believe that they don’t lie the other way as well. That’s just the nature of the business.
So, if fundamentals are just slightly better than worthless, what about the technical side?
From a long perspective, the oil charts look more terrifying than gold!
Some people have no problem with buying high and hoping to squeeze more out of a chart that has gone vertical. Not me, brother. I never played the game that way (unless I was going in heavy for a few minutes or hours on momentum, in which case I didn’t even get up to use the toilet until the trade was closed). I liked oil back in the low $50s, and told you guys all about it. But now, the oil chart has gone vertical and oscillators are pegged in extreme overbought territory on the weekly interval.
I don’t chase moves like this. I just don’t do it. My trading philosophy has always been:
“Buy low, sell high,” or “Short high, cover low.”
“Nobody ever went broke by taking profit.”
“Pigs get slaughtered.”
“When the money honies are paying a lot of attention to it, with the oscillators pegged in extremes, consider exiting the trade, hedging or even reversing the position.”
Could oil just keep right on going? Absolutely. But high oscillator band long entries, especially on the weekly charts, aren’t my cup of tea. I know. It hurts to watch a thing continue to go vertical when discipline tells you, “Don’t do it.” If you’re thinking about chasing a move on something like that, get your husband or wife to duct tape your hands to your desk so you can’t click the buy button on your broker’s web site. Here’s an idea for a product: a firewall that prevents you from buying anything in your portfolio or watch list when the weekly stochastics are over 80.
Considering long on oil, after looking at those charts I immediately thought: Not only no, hell no, and maybe even consider throwing some money away on some deep out of the money January put options.
But some people can’t help it. If you feel as though you want to be in on this, I wouldn’t allocate much on the options, futures or any ETF that tracks oil directly, unless you really know something. That is to say: Event risk is always a factor on oil, but I don’t know anything about the timing of such things, and, chances are, neither do you.
As usual, diversification, diversification, diversification.
I’d look at using a basket of energy ETFs AND I would strongly consider hedging with out of the money put options on oil directly until the weekly oscillators unwind a bit.
There are dozens of energy ETFs out there. And I don’t like having to mention funds that hold so many earth murdering corporations, but if we’re talking about making money on oil, I’ve got to put a clothes pin on my nose and try to force the bile back down.
Look at the energy spiders and vipers: XLE and VDE.
The expenses on these funds are very low. That’s good, considering that the companies involved are responsible for enslaving us all and killing the planet.
Rather than hedging with put options on those ETFs, I’d consider put options on the oil itself. Options are such a crap shoot, I’d only consider them for hedging at extremes. Like on oil and gold right now. Look at some out of the money January strikes on oil puts to go along with your long term energy holdings. You could, of course, just wait for those spiders and vipers to dip and keep your powder dry, in FXF Swiss Franc Trust, for example. If the dollar mounts some unthinkable rally, you can switch out of FXF in an instant (see criticism of doing this with ETFs vs. Forex).
In summary, on oil: The chart has gone vertical. Danger. Warning. Caution. If you must play, use ETFs to spread the risk around, and strongly consider hedging your long positions with put options near term. Consider waiting for the ETFs to unwind a bit. In the meantime, avoid exposure to the dollar with something like FXF.
Consider some alternative energy ETFs as well. Higher fees, but definitely worth a look, in my opinion. Seeking Alpha lists several of them, along with many other conventional energy ETFs:
Claymore/LGA Green ETF (GRN)
First Trust NASDAQ Clean Edge ETF (QCLN)
Market Vectors Environmental Services ETF (EVX)
PowerShares Cleantech Portfolio (PZD)
PowerShares Global Clean Energy Portfolio (PBD)
PowerShares WilderHill Clean Energy Portfolio (PBW)
PowerShares WilderHill Progressive Energy Portfolio (PUW)
Van Eck Global Alternative Energy ETF (GEX)
Since any post on oil is really a post on commodities in general, keep in mind that any portfolio that doesn’t have exposure to the apocalyptic rises in food prices seems boneheaded to me. I don’t see the food price increases as speculative bubbles. When you look at the underlying causes (top soil depletion, drought, costs of fertilizers, energy, doomed agricultural practices, etc) you realize that these rallies could have a long way to go. The problem is: How to play? I’m not saying to become a commodities trader, but take a look at parking some treasure–long term—in the the PowerShares DB Agriculture Fund.
Last but not least, when thinking in terms of scarcity: Think about water.
Water should be the primary strategic consideration at the front of all of our minds, yet it’s just assumed, even by many Cryptogon readers. People ask me lots of questions about investing, but they never ask about investing in water.
Here are some water related ETFs to check out:
PowerShares Water Resources Portfolio (PHO)
First Trust ISE Water Index (FIW)
PowerShares Global Water Portfolio (PIO)
Claymore S&P Global Water ETF (CGW)
With so many ETF options, there’s absolutely no reason to keep too many eggs in too few baskets.
Giggling Robot Becomes One of the Kids
November 6th, 2007Via: New Scientist:
Computers might not be clever enough to trick adults into thinking they are intelligent yet, but a new study shows that a giggling robot is sophisticated enough to get toddlers to treat it as a peer.
An experiment led by Javier Movellan at the University of California San Diego, US, is the first long-term study of interaction between toddlers and robots.
The researchers stationed a 2-foot-tall robot called QRIO (pronounced “curio”), and developed by Sony, in a classroom of a dozen toddlers aged between 18 months and two years.
QRIO stayed in the middle of the room using its sensors to avoid bumping the kids or the walls. It was initially programmed to giggle when the kids touched its head, to occasionally sit down, and to lie down when its batteries died. A human operator could also make the robot turn its gaze towards a child or wave as they went away. “We expected that after a few hours, the magic was going to fade,” Movellan says. “That’s what has been found with earlier robots.” But, in fact, the kids warmed to the robot over several weeks, eventually interacting with QRIO in much the same way they did with other toddlers.
…
The researchers measured the bond between the children and the robot in several ways. Firstly, as with other toddlers, they touched QRIO mostly on the arms and hands, rather than on the face or legs. For this age group, “the amount of touching is a good predictor of how you are doing as a social being”, Movellan says.
The children also treated QRIO with more care and attention than a similar-looking but inanimate robot that the researchers called Robby, which acted as a control in the experiment. Once they had grown accustomed to QRIO, they hugged it much more than Robby, who also received far more rough treatment.
A panel, who watched videos of the interactions between the children and QRIO, concluded that these interactions increased in quality over several months.
Eventually, the children seemed to care about the robot’s well being. They helped it up when it fell, and played “care-taking” games with it – most commonly, when QRIO’s batteries ran out of juice and it lay down, a toddler would come up and cover it with a blanket and say “night, night”. Altering QRIO’s behaviour also changed the children’s attitude towards the robot. When the researchers programmed QRIO to spend all its time dancing, the kids quickly lost interest. When the robot went back to its old self, the kids again treated it like a peer again.
Research Credit: DJ
