Finance / the Markets

• The Strong Dollar Leads to a Fall in Commodity Prices

  Panic is on deck, to use the baseball terminology that my foreign readers are often attempting to decipher. That is the only conclusion one can reach after getting gob smacked by the price action this morning. Copper got spanked for eight cents, oil burned $2, gold shed another $26, and silver puked 70 cents. The tantrum like stock behaviour in producing and equipment companies, like Freeport McMoRan (FCX) and Caterpillar (CAT) has been atrocious. How many of you out there know that JP Morgan (JPM) is the largest holder of futures contracts in the silver market and just got hit…

• The Lack of Accountability that Allowed JPMorgan to Gamble Billions

  If I were to stake you $50,000 and set you loose in the world's largest casino, you might try your luck in a big way at a number of games to see if you could double or maybe even triple your good fortune. But it would be an entirely different matter if the $50,000 were your own money. You might decide to take advantage of the casino's restaurant for which you would at least get a meal in return for your money. And, you might even test your skills with a few hundred dollars. But unless you were a gambling…

• When Hypotheses Are Worth Trillions

  UK banking regulators and the representatives of major banks intensified their discussions on new and more rigid regulatory scheme concerning the setting and calculating the British Bankers Association's London InterBank Offered Rate (BBALIBOR). Libor, sponsored by the British Bankers Association, is the rate set for the inter-bank borrowing and lending transactions worth £220 trillion of securities a day and is produced for ten currencies with 15 maturities quoted for each currency - ranging from overnight to 12 months - thus producing 150 rates each business day.It is also a benchmark rate indicating the average rate at which a bank can…

• The Benefit of the Doubt Market

  It is already January 24, and the S&P 500 has seen a grand total of two down days so far in 2012. Are we on the eve of one of the great bull markets of all time? Is it off to the races once again? I follow dozens of fundamental and trading research services and the number that are flashing warning lights right now is close to an all-time high. For example, the AAII sentiment survey now shows that 46% of investors believe that the stock market will be high in six months, well above the 39% historic average. It…

• International Junior Oil Stocks: How Investors Can Position Themselves for High-Reward International Plays

  Without question, the oil stocks that have made me the biggest profits have been junior oil companies with international plays. Companies like Xcite Energy, (XEL-TSXv) which went from 62 cents to $6 with a heavy oil play in the North Sea, or TAG Oil developing their New Zealand asset, moving from $2 - $6 a share. (The one big international stock I missed was TransGlobe, (TGL-TSX) which went from $3.50 - $20 on drilling success in Yemen and Egypt.) These junior international plays are often orphaned stocks with big, high-impact exploration plays - and if they hit... WHOOSH! The stock…

• Oil & Gas Income Trusts

  The "New Class" in an old, popular investment vehicle Part 1:  A Comeback in the Making? The income trust game is back - just in a different form. Canadian Finance Minister Jim Flaherty killed these high-yield, tax sheltered public companies on October 31, 2006 - not so affectionately called the "Hallowe'en Massacre" by the millions of investors who were enjoying 10%+ payouts annually. Canadian companies had until January 1 2011 to convert back to a regular corporation or face new taxation that essentially reverted them back anyway. But the market has found a loophole that may allow for many new trusts - especially in the…

• How to Play Commodities in 2012

  This is my favorite asset class for the next decade, as investors increasingly catch on to the secular move out of paper assets into hard ones. Don’t buy anything that can be manufactured with a printing press. Focus instead on assets that are in short supply, are enjoying an exponential growth in demand, and take five years to bring new supply online. The Malthusian argument on population growth also applies to commodities; hyperbolic demand inevitably overwhelms linear supply growth. Of course, we’re already nine years into what is probably a 30 year secular bull market for commodities and these things…

• The Stock Market's Dream Scenario

  I’m sitting here with a mountain of technical analysis reports that are causing my desk to buckle this morning, all shouting “breakout”, “buy”, and “uptrend”. So I’m wondering, “is there a scenario out there where these might actually come to pass?” At this point I thought it might be useful to engage in what Albert Einstein called “thought experiments” and come up with a New Theory of Everything. In any case, you have probably all figured out that I am a frustrated novelist. As my old friend and former mentor, Sherlock Holmes, used to say, “Eliminate the obvious, and consider…

• Get Ready to Short the Euro Again

  The financial markets exploded to the upside overnight with news of Europe’s triple resolution of their sovereign debt crisis. As I predicted in my letter only yesterday, the move has caught traders by surprise, enabling markets to break out to the upside from the recent ranges, and give this fall rally longer legs than most expect. As I write this piece, the (SPX) futures have popped to 1275, a new high for this move. Ten year Treasury yields have ratcheted back up to 2.26%, and the dollar is in full flight against a basket of currencies. Here are the details…

• Why I Tripled My Volatility Index Short

  It has been quite a hectic and frenetic day, so I am just getting around to writing out the logic behind today’s short cover of my November (VIX) $35 puts. Basically, I was betting that once the S&P 500 hit the first technical downside target at 1,065, a long overdue and furious short covering rally would ensue. This was when the (VIX) was trading just shy of $46. This was not only an important Fibonacci level, it also showed up in the technical models of several different persuasions. Such a rally would cause the market volatility to plunge, (VIX) to…