I would really like to get huge flucht in die sachwerte
mises.org
/anti-USD, as I just don't see how it survives another year of "measured tightening", and $1.15 trillion twin deficits, that need to be borrowed from foreign central banks money printing, or monetized by the US. That will be an extremely tall order.
My concern short term are these large spec positions in PMs and forex. Given we are really getting deep into a crack boom environment I suspect that will always be the case. However, it's also the way the China, Japan, and US MoP (Ministry of Propaganda) branches orchestrate and play these giant hedge funds like a fiddle. I smell more "maybe we will raise another 25 bps, maybe we won't" BS and noise coming. Then when it looks like it will be the extra 25 bps, the funds do these nonsensical liquidations.
The copper sell-off was a classic. I have a card where I jot down the daily draw downs, and going back about the last 200 days, I can only find five days where meaningful adds were put into inventory. So we get one of those this week coupled with more "tough talk" out of the China MoP, and copper sells off 15 cents. Cu was trading at 1.30 last Feb with over 500,000 MT still in Comex and LME, and here we are now with only 129,160, and the same price level, peculiar! So I'm more and more convinced that the way to play anti-USD/flucht in die sachwerte, is to buy into these bull market swoons, and then gingerly sell into strength when the funds get back overly offside. I will review where I think we are on various flucht in die sachwerte plays here:
Grains: On occasion a commodity looks to be cocked and loaded for a big run, with stunning spec short positions, not longs. Grain has that look and smell, especially corn. Of course I was too early here, as I was suspicious of crop expectations (and I may still be right?), and lost in corn all I gained in copper, at least to date. Notice that despite the lack of shipping, the Asians have been taking down orders at this price.
cbot.com
That's because their grain inventories have been neglected in favor of other goods since mid year, and it's catch up time.
Gold and silver: Long term: very bullish, short term: funds are in too heavy, making it vulnerable to MoP games, or "extra monetary tightening". Still, I am maintaining my core PM stock holding at about two thirds the level of last summer's great buying opportunity. Have cash on hand for any swoons that may develop. Strong seasonals pick back up in early Nov.
Copper: I do believe Asia (and the US) is contracting. But the 64k question is can it contract enough (a depression) to head off a drawdown in copper towards zero? My approach is straightforward, follow the drawdowns.
kitcometals.com
This is slowing down, but the trend is clearly emptier, and emptier, and emptier. To me $1.30 Cu just doesn't reflect the rationing that's underway. I got aggressive on this swoon, I had sold one-fourth my futures at the 1.42-1.43, area, but doubled up at 1.29. Sold half my base metal stocks pre-swoon, and that's where I still am. I'm using the Aussie too, as a substitute for commodities, and because they have some semblance of a responsible CB. I bought some at 71.95 during the swoon, but may pare out early next week.
Energy: To me the spec position isn't offside enough to get a large correction here, so I lean toward the deep do-do camp, and consider the supply-demand structure to be real and severe. Think AG spewed out an exceptional amount of clueless garbage Friday. Still, I do feel the MoP is putting together all it's resources to crack and manipulate this monster, at least some. They haven't been nearly as successful here, as in these other markets. Still my energy powder has been dry since summer, as I think they manage to get CL back under $50. The energy stocks have lagged, but my plan is to try and buy XLE in the $33 or under area on a sell-off.
stockcharts.com[l,a]daclniay[pd20,2!b50][vc60][iUc20!Lf]&pref=G
Stock market: I think this looks vulnerable to a huge swoon. I'm using XLF, XLY, RTH, IWM, QQQ, and OEX puts. The XLF and OEX worked nicely in October because of the drop in financials, the rest were washes or small time premium losses. Put premiums are extremely low right now, which favors the buyer. If they started to widen I'd shift to naked call writing to play a bear market.
Forex: Aussie noted above. The other play is the Yen, and that's because I see a repeg coming from China, sooner than later. I will just follow the commercials, because they may have a clue on timing. I bought Yen last week at 91.22, and the COTs indicate commercials have reduced positions although are still long. I may go another week or so with it, as a Yuan repeg may happen in this time frame, and not days before the elections, or afterwards, at least that's my theory.
Rate plays: To me it appears the "extra 25 bps" game is about to be played again by the MoP, and right now the market is priced that it's not going to happen. I haven't had much luck with rate plays since my spectacular short ED home run earlier in the year when everyone was convinced 1.00% Fed Funds rates were permanent. But longer term I'm a big bond bear, and the reason centers around the notion that Asian CBs won't be able to sustain money printing at current levels to finance over a trillion in US Old Maid Cards. The second reason is the credibility question about inflation and how the US MoP crowd lies. When you have someone like Bill Gross calling that into question,
pimco.com
then that suggests the MoP/Wizards now have Toto running around loose, with the potential to pull back the curtain. Right now based on the COTs and my philosophy, I'm short the Dec 5 year at 111 1/32. I'm watching the EDs, the March might be doable for a short if it upticked a bit more first. 97.57 (2.43%) seems to mostly be pricing only slightly more than one rate hike, and I'd say two is more likely. |
