May

23

Or red.

Earlier this year, traders were compensated for enduring declines with further losses. Then after a volatile March, buying or holding declines was rewarded with gains, and even the risk of holding gains was well compensated.

What is the intermediate trend? Now going down again, one question is when we will see a return to decline-momentum, and is there still compensation for betting against it.

A better question is whether the opportunity cost of fighting the beast is ever adequately compensated in the long term.


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5 Comments so far

  1. Anatoly Veltman on May 24, 2008 1:20 pm

    Yeah really: up until last year, everyone thought (I didn’t) that commodities just don’t appreciate long-term at the rate that stocks do. What do people think now, given new (Asia) paradigm?

  2. steve leslie on May 25, 2008 9:51 am

    In my view and the view of those far wiser than I, until the issue of an inexorable rise of the price of oil and a deflated dollar are addressed and corrected, the market will struggle. Further, calender wise we are entering a period of the Summer months that one can argue is not a good time for the market.

    When, I hear from esteemed experts such as Art Laffer responding to how do you fix the U.S. dollar and he says he really does not know it is a pause for concern.

    A few points can be made. The market is gallantly fighting against some very difficult issues. It reminds me of a swimmer caught in a rip current who must swim parallel to the shore until calmer waters can be found so they might swim toward shore. If they choose to fight the current and swim directly into it they oftentimes meet their demise.

    There are some rays of hope out there. China indicates that they are going to stop subsidizing oil purchases after the Olympics. India has indicated that they are also considering such measures of interrupting subsidies of oil. Will the Memorial Day weekend be a barometer that the travel plans are being altered because of gasoline costs. Thus the American consumer may weigh in on this issue and go back to car pooling and reducing overall miles driven. The transportation index appears to be holding up well thus supporting Dow Theorists.

    The dollar has at least stabilized for the meantime. As for the summer issue this is a toss up at this point.

    I think upon Sun Tzu’s Art of War I paraphrase:
    “Now an army may be likened to water,
    for just as flowing water avoids heights
    and hastens to the lowlands, so an army
    avoids strengths and attacks weakness.”

    check this website out for other Sun Tzu insights
    http://www.suntzu1.com/content/ancient_wisdom_for_todays_econ/

  3. steve leslie on May 26, 2008 8:33 am

    I believe we will be hearing much more about the great China earthquake in the coming months and this might be an indicator of some sort. Whether it is a "Grey Man" or not we shall see. However the earthquake was of remarkable power. One of the highest ever recorded. The deaths are in the 50,000 to 80,000 range and I am sure this number is understated. As with the Tsunami in Indonesia, nobody really knows how many perished in this event. but more importantly the infrastructure damage could be much more severe. over 15 Million homes have been destroyed. Many more millions have been displaced from their homes. It is being reported that 69 dams have been severely damaged and the Three Gorges project lies 250 miles away and may have been affected however officials are dismissing this. Aftershocks have been reported and buildings shook in Beijing 800 miles away.
    http://apnews.myway.com/article/20080525/D90SKBMG0.html
    http://www.bloomberg.com/apps/news?pid=20601087&sid=aL_Ut2KTEQ9c
    For a very rare instance, China is accepting outside help from other countries. Russia is sending tents other countries are offering assistance. This is from a country that has been a closed society for thousands of years. With heavy rains expected further catastrophes may be on the horizon with flooding mudslides and further destruction. Perhaps as many as a million people are in direct danger from flooding. It may also be relevant to observe how well received the Olympics are and attendence in light of the effects that oil has on travel plans. China is using the Olympics as a way caste themselves as a legitimate superpower and a sophisticated modern society. Not unlike The Soviet Union did in 1980 and Germany in 1936. Perhaps China is the proverbial "peeling of the onion."
    Much to be learned from the Forbidden Kingdom. sl.

  4. Anatoly Veltman on May 26, 2008 10:18 am

    In lieu of others tackling my question: I kicked around a few long-term charts over the weekend; and, voila… My conclusion: respectable commodity rally to-date, but no new paradigm!
    1. Crude is sporting classic impulse, that has basically reached its proportionate near-term objective. Depending on daily currency fluctuations, it will/will not make new highs; but bigger picture favors roll-back all the way into $50’s, from where secular bull can pick up again.
    2. Natural Gas may well do relatively better (on BTU basis); those who can’t stomach shorting Crude outright and soon - could assume inter-commodity spread.
    3. Metals are nearing fantastic shorting opportunity, also to be entered once you get currency signal. $200-300 Gold pull-back, some $7 in Silver, $2 in Copper and at least $1000 in Platinum; all these would still be corrective within secular bull.
    4. Beans may well keep their teens for a decade; but a pull-back toward $10 at any given point would not be surprising. Corn will give-up half of its price on ethanol curtailment. Wheat chart will look very attractive - as soon as 50% correction is completed.
    5. Cotton and Hogs prices never broke any new ground - despite Energy and Grains doubling their records. What new paradigm?

    Now, all of the impending corrective commodity activity does not portend new stock market highs. Fed prevented liquidity dilemma - but still it is powerless vis-a-vis cyclical recession

  5. steve leslie on May 27, 2008 1:52 pm

    To underscore this manifestation of the China catastrophe another earthquake struck destroying 420,000 homes on Tuesday. Mass evacuations are being held in anticipation of monsoons mudslides and flooding. sl.

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