Wednesday, February 29, 2012

Pour some sugar on me

Sugar has been creeping higher lately, as seen on the daily futures chart. 



Here's the weekly view which shows the longer swings going back to 2006. 



Note the larger uptrends and ensuing deep retracements that have happened from the 2007 base, near 10 cents, on. 

Of course, the latest move is more of a slow edge higher off the recent price shelf of 23-24 cents. Sugar will have to clear the 30 cent level and the recent highs near 32 cents before any major move is evident on the weekly charts.

Here's the daily chart of SGG, the sugar ETN. I'll be watching for a pullback on lighter volume in the days ahead. Since I'm not active in the futures market, I'll consider a long position in SGG. 



Cautionary note: volume is very light in many of these single commodity ETNs. That may lead me to consider other, more liquid, trade opportunities instead.  

For those who'd like to read more about sugar from a futures trader's point of view, please see Peter Brandt's recent blog posts. He is an experienced trader and knows far more about the long-term price action, as well as building a trade via back month futures contracts.

Disclosure: no position in SB_F or SGG at the time of writing, may initiate long or short positions any time after. Educational post, not a recommendation for readers to buy/sell any security.

Sunday, February 26, 2012

John Burbank talks oil, macro with Bloomberg



Noted hedge fund manager, John Burbank of Passport Capital talks oil, investing in Saudi Arabia, stockpicking in 2012, and global macro in this recent Bloomberg TV interview. 

A few key points from Burbank's interview: 

1. Oil prices are up 16% YTD, which hurts the average oil-dependent consumer (chart). Burbank feels global QE operations and "liquidity" boosts are pushing up oil prices. If gold goes up 10-20%, it doesn't cause problems for consumers the way rising oil prices do.

2. Rising oil prices are benefiting Saudi Arabia. Passport now has 15% of its capital in the Saudi stock market, a country which is slowly opening up to foreign investors. 

Passport started investing in Saudi Arabia in 2008 (through notes & swaps) and Burbank feels the potential there is similar to India in the 2003-2004 period. Here's a chart of India's SENSEX over the 1998-2012 period.

3. Liquidity is coming into the market because "things are really bad", not because things are good. Burbank feels that confidence in central banks is misplaced. The average Westerner's standard of living is not improving; rising prices and stagnant incomes are squeezing them.

4. 2012 is a stockpicker's market, a good year to be long or short certain sectors and individual names. 

Burbank is not banking on a sustained global rally. Instead, he's looking to invest in stocks that can outperform regardless of growth rates in the overall economy. Biotech is one area that he finds promising at this time. 

Enjoy the interview, and if you'd like to hear more from Burbank and other macro stars, check out the interviews in the related posts section below.

Related articles and posts

1. Must hear interview with John Burbank of Passport Capital.

2. Michael Burry talks "Big Short", America's future at Vanderbilt.

Wednesday, February 15, 2012

Nassim Taleb on Antifragility

Nassim Taleb on Antifragility, interview at EconTalk (Hat tip: Nancy Miller).

Key early point from Russ Robert's chat w/ Taleb on fragility vs. "antifragility": 
"...Art [Devany] gave me a lot of ideas and suddenly everything flashed together, when I made the distinction between two types of systems, the organic and the non-organic.
The organic has the property that the difference between the living and the dead, the living and the non-living; the living, between living and a machine for example, requires stressors. That's how the complex systems communicate with their environment. You need a stressor. As with the bones, with your muscles, a lot of things. And usually overcompensate for the stressors--there is a mechanism in biology called hormesis. This table I have in front of me will never get better if I bang on it. Use it and lose it.

On the other hand, the human body gets better if it is exposed to the right amount of stressors. Of course, you have to define the stressor and the quantity of stress. But then that makes a difference between two worlds--the organic and the engineered. 


And now, if you can apply that to economic life--is economic life in the first or second category? If it's in the first category then we should have bailouts, top-down engineers, everything. If it's in the second category then sorry, you know, it doesn't work that way..." 

Enjoy the discussion, hope it stirs some reflection. 

Wednesday, February 08, 2012

Charts: potential new uptrends in CREE, DLB

Looking at a potential change in trend for CREE, maker of LED lighting products. 



I've done up the chart in the manner of Vic Sperandeo's "1-2-3" trend change guide. As you can see, CREE has broken out above the trend line. The lowest low preceding the breakout provides a test floor or boundary and the previous minor rally high acts as the ceiling which CREE must break through to define the change in trend. 

Right now we have a possible change in trend. If CREE tests that upper boundary and then breaks out above that previous high, we'll have a defined trend change and a new uptrend in place, according to Sperandeo's method. 

Also, a recent break above a year-long downtrend line and a successful fill of a prior downward gap at the 37.60 level may be a sign of a positive trend for Dolby (DLB). 



I have to say I'm not as familiar with the current fundamental picture on Dolby. Of course, they are a leader in film sound technology and surround sound, etc. for home entertainment. 

A bit more research will have to be done here (and I'll also take a look at IMAX and RLD), but I think it's safe to say we all know that...

Spinal Tap in Dubly Dolby
"You don't do heavy metal in Dubly, y'know..." "She means Dolby." - Spinal Tap.

Monday, February 06, 2012

Puplava: listen to what the markets are saying

While catching up with Chris Puplava's latest market update last night, I had to stop and share some of his words with our followers on Twitter

Read the opening of Chris' article, "Stop Talking and Start Listening!". You'll find some worthwhile comments on interpreting data and the importance of maintaining accountability in one's market calls. 

"...Far too often investment managers and economists spend more time espousing their views and then defending them until eventually proven right (“I was just early”), rather than spending more time analyzing their assumptions and being honest enough to say, “I WAS WRONG!” and then moving forward. 

Part of the problem is that they create a view and then find evidence to support their views rather than starting from the bottom up by collecting an exhaustive amount of data and then summarizing the collective message rather than their views. 

Basically, listen to the message of the markets and then interpret those messages rather than telling the markets what they should be doing. What the market IS doing is far more important than what you think the market SHOULD be doing...

This is an excellent summary of one of the biggest problems I see in the 24/7 cycle of market commentary and trading. People have become too enamored of their own market view/"thesis" and too concerned about the risk to their reputations to come out and admit they're wrong.

Of course, if you are tied to a certain view or position and can't admit you are wrong, it could have an adverse effect on your trading or investing returns. Some people may hesitate to cut their losses on a bad trade or reverse their position (say, by going from short to long on a certain security or asset) if they've anchored themselves to a privately held or publicly expressed view.

Now that blogs and real-time social networks have allowed us all to become "mini-pundits", the risk of spouting off in public and ignoring the message of the markets has shifted down from media stars and big-name fund managers to the rest of us. 

But guess what? That also provides us with an opportunity to face the music and occasionally admit we were wrong about something, which may actually help build trust with our audience (and in ourselves) in the long-term. 

Because let's face it: no one wants to listen to someone who is never wrong and is always (magically) right. Why? Simple. Such people don't exist, oracles and sages of mythology aside.

Now back to the macro view. Despite some well-known recent calls for recession from ECRI and others, Puplava feels the markets and economy are in "bullish harmony" and are sending us a message that there is no bear market or recession ahead. Take a look at the article and examine the arguments for yourself. 

And remember, hold yourself accountable for your own market actions and judgements. Try not to impose your views on the market, and try to be flexible in your trading, especially when it comes to admitting you are wrong about something. Your thinking and your results might improve!

Related articles and posts

1. Zen and the Art of Trading.

2. What makes a great trader? Managing risk.

Friday, February 03, 2012

Trading journal update: what's happening now