Friday, February 27, 2009

Trading Report: Setting the Scene

Let me begin my setting the scene.

The Thesis: I believe that the best (only?) trade or even long term position right now is commodities. Yes, we're in an ungodly recession, depression, whatever kind of -ession you want to call it. Yes, it will get significantly worse. (Not going to talk my book, but believe that. Hell, residential RE and the attendant issues are not fully resolved.) However, there is a certain level of demand for commodities, especially oil, that will put a floor under their prices. It could be argued that in the high 30s, West Texas Intermediate crude oil is free. Not cheap - free! Even at the worst prices of summer 2008, oil was cheaper than water (another mis-priced natural resource).

The Security: The PowerShares DB Crude Oil Double Long ETN aka DXO.

Now that you have some background on my thinking and the stock I used to express my views, the next few posts will explain the mistakes that I see. If you happen to notice others, by all means, let me know in the comments. My goal is to both help my own understanding of my mistakes so I don't repeat them, and to share that experience with others, so that they avoid them (or at least correct them sooner).

Until next time...


Cassandra said...

I know you're talking commodities in this post. I agree that it'll be a good long term position once you pick the right stocks.

I wonder what you think of long term positions in the banks, in particular C,citigroup, and GOOG, google, though.

Personally, I'm conflicted on C. Even though I've seen my stock crater and almost implode, I'm still holding on. Maybe in vain.

Google's stock price I believe will exponentially grow within the next 15 - 20 years because of their pursuits into the utilities market. It's cheap now and I'm happy to buy as much of it as I can.

What say you?

Khyron said...


I trade equities and ETFs/ETNs now, though I imagine I could trade commodity futures at some point.

Long term positions in the banks? When it comes to banks, or at least moneycenter banks such as C, BAC, WFC and JPM, I smell death, and I trade them from that position. There are still a few good shorts among the financials, though nowhere as good as they were last year.

Long is wrong right now, IMO, and in the opinions of many people I deal with. I think, on a purely technical basis, we're getting closer to the point at which one could consider going long. We are not there yet, though, and I wouldn't advise it.

C just broke $1 on its way to a goose egg. If you held on this long, just let it go. Take your tax loss, sell it for whatever you can get and move on.

GOOG doesn't compel me. That's me. There are plenty of other tech names that appear more compelling in this environment. I'm not going to name any since I don't follow tech much. The investment thesis for tech, as opposed to commodities, just isn't very convincing IMO. GOOG in particular seems too unfocused. If not for advertising, they'd have nothing for all their experimentation. At least they can afford to fund it, but even the great GOOG has let go people now.

Things will get worse. I'm concentrating on shorts, and targeted longs, and mostly for swing or position trades (day trades if I can scalp enough).