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
Stocks valuations, analysis. Unbiased. Insightful. Property of Wolfteam Ltd., www.wolfteamedge.com If you find the blog useful, LINK TO www.posledovich.blogspot.com Stocks, Bitcoin, Cryptocurrencies, AI, analysis, insights. CLICK ADVERTISEMENTS, SHARE ON SOCIAL NETWORKS! Technology, Bitcoin, AI, company strategy, stocks analysis. Stocks, crypto involve high RISK! Nothing on this blog is meant or should be construed as investment recommendation to buy or sell securities or their derivatives!
2 comments:
Hi, Peter
commodities will spike in general, so I do not see any reason for selling any of them (wheat soybeans, etc.).
Swiss Frank is a currency after all. Gold is a good choice, but it is not a commodity and has usually and historically been a good hedge, however it is not for speculation, rather for wealth preservation.
I do agree that it seems that we are going to see very high prices for crude oil.
I do not feel confident with leveraging positions, because the indexes are too volatile and they can squeeze you exactly when you need cash. And leverage can wipe you out, if you are not careful.
So ETFs are not my thing.
For long run investors - long commodities, this is the game of the decade, but without leverage.
So I would be in precious metals for wealth preservation, maybe also in some commodities and land for the moment.
Remember however that risk is rewarded in suppressed markets, which are very few currently to be found. This makes me extremely bearish at the moment for every market, so I will sit down and wait.
Dear Tsek,
Thank you for your comment.
The views are for the current week.
Long-term investing, in my humble opinion, is a good way to play the fixed income market. And even there you have to pick the portfolio duration.
Just look at the results of the main US and European equity indices for the last 10 years. Commodities are too volatile aswell.
ETFs are generally not leveraged instruments. There are some leveraged ETPs, but they are NOT for long-term puropses.
Short-term investing is useful(if you predict correctly) for short time horizons. 1 Week -> 1 Month. Basically, you need volatility and in the last 3 years there was plenty of it and it will not go away soon, since the fundamental problems of too much sovereign debt will take time to be resolved.
Add to that Middle East turmoil...
Each person has his own risk tolerance and he should invest accordingly. Various portfolios serve various purposes -> some are for wealth preservation, some are for (volatile short-term) profits!
Best,
Petar
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