Did the commodity bubble burst? Difficult to say..

Dear Reader,
Silver and Oil plummeted las week. 10% down day move should happen very rarely with 0.1% probability according to the normal distribution... In the last decade there have been more than 10 such daily moves...

Well, did the commodity bubble burst? In my opinion, not yet. The really interesting events will unfold when the FED exits the QE 2 program. Volaility will certainly pick up substantially.

For now,  I am going to sit out and wait. Oil broke through the psycholgical barrier of 100 USD, silver is not far from 30 USD. Once these barriers are decisively breached, a good hypothetical idea is to buy 4 months-1 year out call options on SLV, USO, GLD.


Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities (apart from regular day to day use) or their derivatives traded on exchanges, and options on indices or ETFs, stocks traded on exchanges and I do not plan to own them in the next 72 hours!

Low volatily in bubble territory..

Dear Reader,

Results from the previous two weeks as of last Friday's close: Buy USO(+5.3%), Buy SLV (+10.5%), Short(-5.0%), Sell XLF(-2.82%).
If 25% of portfolio each = 0.25*(+5.3%)+0.25*(+10.5%) + 0.25*(-5.0%)+0.25*(-2.82%)= +7.98%
A very good result!

For next week: I am not sure. Silver and gold look bublish. I think silver will make a historic high and then... who can tell :-)
A good hypothetical strategy would be to buy put options on SLV but calculating the results on a portfolio would require too many assumptions. The stock market exhibits low volatility. In my opinion this could change very abruptly.
So I have decided to sit out this week and see which way will the market go. No clear trend in sight.

Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities (apart from regular day to day use) or their derivatives traded on exchanges, and options on indices or ETFs, stocks traded on exchanges and I do not plan to own them in the next 72 hours!

Happy Easter! (Hypothetical positions will run till end of next Friday)

Dear Reader,

Happy Easter to all christians!

I will let the positions from the previous post run till NYSE close on Friday, 29 April 2011.


The disclaimer from the previous post is valid in this post as well!

It's a curse to live in interesting (volatile) times! Volatility, however, can be a good thing.

Dear Reader,

S&P today put the USA on negative watch (!) Wow! This is basically history unfloding before our eyes. The Great recession (2008), Middle East, Japan(earthquake and nuclear crises), The EU sovereign crises, now this.
The global pond is swarming with black swans. Unbelievable!

Results from last week: Long USO (-2.8%), Long SLV (+5.1%), Long JJA (-4.1%), Short XLF (+1.9%).

If each position comprised 25% of the portfolio the result would would have been:

0.25*(-0.028) + 0.25*(+0.051) + 0.25*(-0.041)+ 0.25*(+0.019)= +0.01%. At least I would not have hypothetically lost money.
Anyway, my personal view on the market for next week is: Buy USO, Buy SLV, Sell XLK (SPDR technology), Sell XLF. Starting point today NYSE's close, end point Friday 22.04.2011 NYSE close.



Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities (apart from regular day to day use) or their derivatives traded on exchanges, and options on indices or ETFs, Stocks traded on exchanges and I do not plan to own them in the next 72 hours!

Markets seem to go up (almost) all the time. Will this continue?

Dear Reader,

Last week the price of oil continued to rise and the uprisings in the Middle East are from over. Gold and silver seem to be entering bubble territory. Silver went up 8.1% last week.

Results from last week: Long USO (+4.6%), Long SLV (+8.1%), Long JJA (+2.2%), Short XLF (+0.4%).
If each position comprised 25% of the portfolio the result would would have been:
0.25*(+0.046) + 0.25*(+0.081) + 0.25*(+0.022)+ 0.25*(+0.004)= 0.0115+ 0.0203+ 0.0055 + 0.0010=0.0383= +3.83%. A good result.

Commodities and precious metals, however, are entering dangerous highs. Markets can continue to go up a long, long time and it does not seem a very good idea to be short. There is too much liquidity all over the world, some commodities are above their 2008 highs, some are a fraction lower...

Anyway, my personal view on the market for next week is: Buy USO, Buy SLV, Buy JJA, Sell XLF.
Basically, the same as last week, but I expect a major pullback in risk assets to take place soon. Precious metals, basic metals and agriculture (cotton, sugar) seem ready to sell off sharply. The same goes for equities.
However, for now the supply of more liquidity to the markets seems to support prices.

Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities (apart from regular day to day use) or their derivatives traded on exchanges, and options on indices or ETFs, Stocks traded on exchanges and I do not plan to own them in the next 72 hours!

Uncertainty remains. Volatility was not present last week (!) The probability of this lasting is not high, according to my (humble) opinion.

Dear Reader,

Results from hypothetical trades last week:  short USO (-4.3%) and long SLV (+1.9%), so the portfolio result is: 0.5*(-4.3%) + 0.5*(+1.9%) = (-2.15%) + (+0.95%) = -1.2%

Seems the uncertainty was way to high for oil to go down. I heard an analyst say that Libya (2% of global oil production) was responsible for a $20 up move. And some people say there is enough oil in Cushing Oklahoma to cover the needs of the USA for (long) enough time ?! :-)
There some 200 mln cars in the US, according to various news sources...

My hypothetical views for next week: Buy SLV, Buy USO, Buy JJA, Sell XLF.

If the stock market goes down, financials will hurt, as far as I can asses.

Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities (apart from regular day to day use) or their derivatives traded on exchanges, and options on indices or ETFs, Stocks traded on exchanges and I do not plan to own them in the next 72 hours!

Portfolio Concentration - a good or a bad thing? Let's see!

Dear Reader,

Last week, I didn't post any ideas since I wasn't convinced. This week is another puzzle, but I am going to give it a try anyway.

The portfolio outcome will be based on today's (Monday) closing price and Friday's NYSE close.

I believe this week will be less volatile, so I need concentrated, volatile ideas.
Namely: Short USO (since the more the rebels advance on Tripoli, the more oil seems to retreat) and long SLV (gold is still a safe heaven, but I suspect if there is a positive change, it will be minute, so I am going to use the leverage silver provides). Each hypothetical trade will encompass 50% of the portfolio.


Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities(apart from regular day to day use) or their derivatives traded on exchanges, and options on indices and I do not plan to own them in the next 72 hours!

So many black swans, fluid situations, let's hope the positives outweigh the negatives

Dear Reader,

Things are getting more and more difficult to weigh. War is war, nuclear reaction is very difficult to predict.
Results from my personal views on the markets: USO (+0.7%), GLD (+0.1%), May 21, 2011  SPY PUT @ 134 strike is up (+13.0%), Sell JJA(-1.2%). If I had invested 25.0% of my portfolio in the four mentioned instruments the result for last week will be: (+1.75%) + (+0.025%) + (+3.25%) + (-0.3)% = + 4.725% for my hypothetical portfolio.

Regarding next week.  Basically, I am perplexed. No clear trends, as far as I am concerned. Libya and Japan remain fluid. So I am sitting out next week. Let' rest a bit.

Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets. I do not own any of the mentioned commodities(apart from regular day to day use) or their derivatives traded on exchanges, and options on indices and I do not plan to own them in the next 72 hours!

There is (very likely) no such thing as a 0 (zero) probability event

Dear Reader,

The events from the last 2 months show there is (in all probability) no such thing as a zero probability event. Tunisia, Egypt, Libya, Saudi Arabia, Japan (earthquake, tsunami, posiibility of a nuclear disaster...)

Results from my personal views on the markets: USO (-3.9%), GLD (-0.8%), May 21, 2011 PUT @ 134 strike is up (+13.9%). If I had invested 33.33% of my portfolio in the three mentioned instruments the result for last week will be: (-1%) +  (-0.3%) + (+5%) = +3.7% for my hypothetical portfolio.

Regarding next week. Things in Japan seem scary to say the least... I expect most risky asset classes to sell off next week, including oil despite likely unrest in Saudi Arabia.

My personal views on the market for next week: Sell USO, Buy out of the money May 21, 2011 PUT @ 134 of SPY, Sell JJA, Buy GLD.

Basically, probability is a fascinating thing...

Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets.

I do not own any of the mentioned commodities or their derivatives traded on exchanges, and options on indices and I do not plan to own them in the next 72 hours!

The Situation in the Middle East remains 'fluid', anything can happen

Dear Reader,

I will post 'results' if hypothetically I have entered in the mentioned in the previous post positions  at the closing prices on Friday 25th February and sold the investments at the closing prices on Friday 4th March:
NYSE Tickers 'Results': USO (+6.7%), GLD (+1.4%),  Short JJA (-3.4%), SPY (+0.1%), but the out of the money April 2011 @ 140 USD PUT on SPY is +15% , FXF (+0.3%).
By  simply manually adding the results we get a profit of 20.1%. This is the result of my view on the market for the previous week!

The above mentioned tickers are ETFs on commodities, currencies and a put on the S&P 500 index. Just enter the tickers in Google Finance or Yahoo Finance and you will get more details!

For the week ahead: Nothing is certain!  The protests in oil rich Libya and Oman continue. 'A day of rage' is scheduled in Saudi Arabia soon according to western media. Anything can happen...

Personal views on the market for next week: Buy OIL, Buy Gold, Buy Silver, Buy out of the money puts on the S&P 500.


Disclaimer: Please be advised, this is NOT a reccomendation to buy the mentioned securities, commodities or their derivatives. This is just my personal, hypothetical view on the markets.
I do not own any of the mentioned commodities or their derivatives traded on exchanges, and options on indices and I do not plan to own them in the next 72 hours!

The preivious week: 'Power to the people' and oil spiked!

Dear Reader,

It has been an eventful week, hasn't it. Uprisings in Tunsia, Egypt, Libiya, Yemen etc. Basically, the whole Middle East is about to fold into chaos...

Is this good or bad for investments? Volatility is always good for short-term traders!

Main themes: Oil, Stocks, Agriculture, Gold, Silver.

The price of oil spiked more than 10%. People thought  the prices of agriculture are skyrocketing. Chaos ensued and investors sold aggresively wheat, corn, soybeans etc. 'Every cloud has a silver lining'
Stocks, especially in Europe, recorded heavy losses? How to play these events?

An obvious choice is oil companies who do not have large operations in the Middle East-> Exxon Mobil, Chevron, Lukoil, companies doing business in the canadaian oil sands. Gold is another excellent choice. When the world looks like it might end, people turned historically to gold. For the next couple of weeks, I think 'risk is back on'. Investors will flee risky assets as stocks, commodities and go to the safety of US and German government bonds. Here I should warn if states in the US are allowed to fail or countries in Europe default, even bonds will sell off aggresively. Agriculture will go down again. Everything depends on whether the Libiyan situation will be resolved soon and if Saudi Arabia is thrown in turmoil. An investment bank recently published an article, quoting a price for oil above $200 if the unrest spreads to Saudi  Arabia...

Personal view on the markets: Buy OIL in the form of futures or ETFs. Buy GOLD. Buy swiss franc.
Buy out of the money  put options (1 year until strike) on the S&P, DJIA and Nasdaq.
Sell Wheat, Corn, Soy beans.
The positions are with a time span of 1 week, since today.

Disclaimer: At the moment, I do not have any positions in oil, gold, wheat, corn, soy beans and their derivatives. I  have  neither any option trades on, nor have I bought swiss franc currency crosses, or stocks of the energy companies mentioned in the analysis! I do not plan to enter in the afore mentioned trades in the next 72 hours.
Petar Posledovich

Refresh :-)

Hi,

I haven't written for a while in the blog, have I...?

I am going to start posting on financial markets regularly again!

I would post investment recommendations about taking positions in financial instruments: stocks, ETFs and options in particular.
Since ETFs on various asset classes are traded on the global exchanges (NYSE, being the leader, of course) I am going to cover the whole spectrum of asset classes -> stocks, options, fixed income, forex, commodities, volatility and arbitrage strategies!

Bit by bit, I will start posting my views in (short) daily notes for the next trading day and longer weekly views for the next week of trading.

Please be advised, that at first I will not have the time to trade every position I take, since I am working fulltime for a financial institution. But in time I will 'put my mouth where my money is'!

P.S. My belief is that markets are dynamic. So it is (extremely) difficult to predict them for longer time spans. They should be modelled dynamically, which is not done at the moment in (theoretical) financial literature. My views will change and adapt constantly with news and price flow!