The G Manifesto

Commodities take a Breath

Weekly Commentary

For June 22nd– June 26th 2009
By: Matthew Bradbard

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Any sustainable bull market needs to take a breath and rest up for the next leg. The long commodity trade that has been working for the last several months has been momentarily put on hold. So what to do as a trader? We have taken profits on longs, decreased our long exposure, tightened up stops or in some instances done the unimaginable, gone short. Yes that’s right, what investors need to understand is when speculating in commodities it’s only a wager on if prices are too high or too low. The contract size is the same, the leverage is the same, the risk parameters and profit potential don’t change that much. The only change is the direction. I’m sorry if you only manage your portfolio as long, in commodities you will have some rough patches. As long as the global economic recovery is in question we may get some dollar strength and commodity weakness but we feel that will be temporary.

To find out exactly how we are positioning our clients in commodity futures and options, Contact us today at 1-888-920-9997. Don’t forget to mention The G Manifesto sent you.

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The 4-Hour Workweek

Currencies
September Euro lost 30 ticks last week on two-sided trading. Support comes in at 1.3730 with resistance at 1.4025 followed by 1.4125. On the daily chart it looks like we could see a trade higher but the weekly chart is not so convincing, so for now we would stand aside.

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The 4-Hour Workweek

The Aussie was lower by 25 ticks last week but prices did close over 2 cents off their lows. Support is seen between .7780 and .7800 with resistance at .8150. We may see a bit more upside but we ultimately expect a trade down to .7500 before any significant upside.

The Swissie managed to gain 16 ticks last week as selling has been rejected now for the last 2 weeks. With verbal intervention last week having little effect, prices could go either way at this juncture. Resistance is seen at .9300 followed by .9400 with support at .9130.

The Loonie gave up 113 ticks last week and on further pressure in energies and metals we would not rule out a trade down to .8500 in the coming weeks. Resistance is seen between .8925 and .8975 with support at .8675.

The Cable advanced 98 ticks on the week but prices have remained largely range bound and we see no reason to have exposure. Support is seen at 1.6150 with resistance eyed at 1.6650. The only play would be to trade the breakout above or below the aforementioned levels.

The yen was the best performer last week gaining 223 ticks and allowing clients out at a profit on their 3 cent July call spreads. Our objective was met mid-week as we advised clients to liquidate their positions at a 33% net profit. Resistance is at 1.0475 while support comes in at 1.0275 followed by 1.0150. We currently have no exposure.

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The Kiwi was positive 4 out of the 5 sessions gaining 63 ticks last week. Resistance comes in at .6450 followed by .6550 with support at .6250.

The September US dollar was lower by 15 ticks. It has been a mixed bag in the last 4 weeks; there have been 2 positive and 2 negative. The weekly chart indicates prices should be moving higher but the daily chart is pointing lower so who knows? Resistance comes in at 81.30 while support is seen at 80.25 followed by 79.60.

Grains
July corn was lower by 23 ¼ cents last week. December corn closed on the trend line dating back to March, we suggest waiting to see how corn trades over the next few days but we’re very close to getting long. Trade idea: long September futures while simultaneously selling 2 $4.40 calls for approximately 17 cents each. The idea is that on a move higher you will make more on the futures than lose on the options. On a move lower you have 34 cents of protection and it is unlikely to see corn break that much. Support on July comes in at 3.89 while resistance is at 4.10.

July soybeans gave up 65 cents last week and are $1.12 off their highs from just 2 weeks ago. We’ve warned you in recent weeks of a violent correction and our prediction is now becoming a reality. We’re still looking to be a buyer of November beans closer to 9.80 prior to the 6/30 USDA report. The weather and traders positioning ahead of the report will determine if a trade to 9.80 is viable. Resistance is seen at 12.15 and support at 11.50 in July.

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The 4-Hour Workweek

July CBOT wheat was lower by 31 ¾ cents last week having closed lower 11 out of the last 14 sessions. Support is seen at 5.44 with resistance between 5.70/5.74. July KCBOT was lower by 24 cents last week. Support comes in at 6.00 with resistance between 6.27/6.30. Both CBOT and KCBOT wheat have traded down to oversold levels so we should see bargain hunting on longs and short covering very soon.

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Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions.

General Investment Themes from Barron’s Roundtable

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A Dead Bat in Paraguay

Weekly Commentary
For June 15th– June 19th 2009
By: Matthew Bradbard

Barron’s roundtable did not disappoint as some of the most influential financial minds were interviewed on what has happened and what is to come, oddly enough we agree with most of what was said. The general themes were: gold should be in your portfolio, a correction in equities is coming, the paltry returns in Treasuries do not justify an allocation, at some point the Fed will be forced to raise interest rates, and finally, the actions by the government should cause inflation if not hyperinflation. Sounds to me like a recipe for a continuing bull market in commodities.
To find out exactly how we are positioning our clients in commodity futures and options, Contact us today at 1-888-920-9997. Don’t forget to tell them The G Manifesto sent you.

Energies
The DOE said crude oil supplies were down 4.4 million barrels, supplies of gasoline were down 1.6 million barrels and heating oil supplies were down 800,000 barrels. August crude oil closed up $3.95 to trade to the highest level in seven months. Prices have traded higher now 7 out of the last 8 weeks, talk about a trend. Last week’s high at 73.90 should serve as resistance, followed by 75.00 with support at the 9 day moving average of 70.40. This level has acted as support since prices closed above the 9 day moving average on 5/18. August heating oil traded higher by 7.90 cents last week. Resistance is seen between 1.90/1.92 with support at the 9 day moving average at 1.8325 followed by 1.76. August RBOB gained just under 9 cents to close above $2 for the first time since mid-October. After reaching that landmark we would expect some profit taking. Support comes in at 1.88/1.90.

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A Dead Bat in Paraguay

The DOE said underground supplies of natural gas were up 106 billion cubic feet last week. August natural gas closed up 1 penny on the week. A triple bottom at 3.85 should act as solid support with resistance coming in first at 4.40 followed by 4.70. Prices were higher by 25 cents last Thursday on very good volume; almost 3 times the average volume of late. We advised clients to cover at least a portion of the recent fence position at a $1600 profit being we could get some spillover weakness from Crude. Our recommended trade currently is to buy the September $4.50/5.50 call spread near $2,200.

Livestock
August live cattle were higher by 65 ticks last week as movement of late has been like watching paint dry. This scenario has played out well for one of the livestock CTA’s that we work with as they typically write “out of the money” options. Support is seen at 80.50 with resistance at the 20 day moving average at 82.35. Trade idea: buy August live cattle/ sell October live cattle at -550.The widest this spread has been is -650, our target is to pick up 200-300 points. August feeder cattle were higher by 1.225 ticks closing 320 ticks off their lows. Support is seen at 96.90 followed by 96.00 with resistance at the 20 day moving average at 99.00.

Demand for pork continues to suffer, hurt by the world’s reaction to the H1N1 virus. Last week the World Health Organization declared a flu pandemic due to the spread of the H1N1 virus. In spite of assurances from numerous health organizations that eating properly cooked pork is safe, the hog industry continues to suffer. August lean hogs closed down .325 ticks having closed lower now for the last 4 weeks. Last week’s low at 57.785 should support while we see resistance at 61.50.

Financials
Stocks: Not only are we seeing less upside but the volumes have shrunk considerably, both signs of an interim top. The S&P added just 6 points last week registering its 12th positive week in the last 14 to close slightly below 950. The Dow ended the week up 36 points to 8799 finally making its way in the black for the year. The NASDAQ rose for the 13th time in 14 weeks adding only 9 points to 1859. We don’t suggest celebrating the 40% rebound for too long as a correction should be just around the bend. As investors recognize the quick recovery and increased growth that has been priced in will not be realized, expect profit taking. Moreover a sell-off is forthcoming being the fundamentals don’t match Wall Street’s perception. Friday we were buyers of July 875 ES puts for clients for $575.

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A Dead Bat in Paraguay

To view our full commentary which includes the sectors of energies, livestock, currencies, financials, grains, softs, and metals, subscribe to our 4 week free trial by visiting this link: http://mbwealth.com/subscribe.html.

_____________________________________________________________________________________
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions.

Chiasso: The Largest Financial Smuggling Operation in History?

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U.S. bonds worth an astounding $134.5 billion were seized by Italian police as smugglers attempted to cross into Switzerland earlier this month. Authorities have not indicated if they are real or fake, but either way, it could have implications for the U.S. bond market and the value of the dollar.

AsiaNews is reporting that Italy’s financial police seized bonds worth $134.5 billion from two Japanese nationals at Chiasso, an Italian border city known for catering to Italians who want to keep their money out of the Italian banking system. The confiscations include 249 U.S. Federal Reserve bonds each worth $500 million, plus 10 Kennedy bonds with face values of $1 billion, in addition to various other bonds.

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If proven real, it “would be the largest financial smuggling operation in history,” says AsiaNews.

But if the bonds are authentic, it raises the question: Who do they belong to? The high face-values of the bonds are not available in regular banking and financial markets and are typically only handled by states. That would mean that some government is trying to sell a huge chunk of its dollar holdings.

But which? There are very few countries that would be able to move such large amounts. $138 billion is approximately half the total value of all goods and services produced in a year by Iran (which is a major oil exporter). Only three candidates are easily identifiable: Japan, China and the United States.

Although China has been very vocal about diversifying its reserves away from the dollar, since the two foreign nationals arrested were supposedly Japanese, Japan is for obvious reasons the prime suspect.

The Italian daily Adnkronos did not report the official charges against the two nationals, but indicated they may have been detained on suspicion of attempting to take a large amount of securities out of Italy without declaring it.

But why would Japan risk covertly moving tens of billions across country lines in a briefcase with a false bottom? Was this an attempt to quietly unload U.S. treasuries without having to sell them on the open market and risk setting off a market stampede and causing a dollar panic?

“Notice, by the way, that the U.S. media has totally ignored this story—even though the securities in question are allegedly U.S. instruments,” writes Karl Denninger for The Market Ticker. “Might the authorities know they’re real and be just a wee bit nervous that disclosure of a sovereign attempting to covertly dump nearly $140 billion in debt could cause a wee bit of panic, given that we’re running nearly $200 billion a month in deficits?” (June 11).

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For now, the jury is still out. The bonds may very well turn out to be forgeries. But even if the bonds are fake, the matter might be even more worrisome, and not just because it would be “the biggest counterfeiting operation ever, by a factor of many times” (ibid.). AsiaNews ominously reports: “[T]he quality of the counterfeit work is such that the fake bonds are indistinguishable from the real ones.”

Picture the Bernie Madoff fraud times two—and that is if this is the only incident.

High-quality fraudulent treasury bonds measured in the hundreds of billions is the last thing the U.S. government needs to deal with right now. The U.S government is attempting to find lenders to finance record spending and stimulus packages to prop up the U.S. economy. Meanwhile, it is trying to convince those same investors that the dollar will not be devalued, and that it is a stable store of wealth. Hundreds of billions of fraudulent securities does nothing to secure that faith.

Students of history will know that various countries have counterfeited currencies of foreign nations to influence currency exchange rates and undermine faith in foreign central banks. Even today, North Korea is known for counterfeiting the U.S. $100 bills. It is possible that something along those lines is occurring here too.

This is a story that deserves watching. The ramifications could be very significant.

Source

A few points need considering:

1. When it comes to Italy the world press has tended to focus on Italian Prime Minister Berlusconi’s personal problems rather than on stories like the bonds smuggling affair which has been front page on Italian newspapers.

2. The fear of counterfeit bonds and securities has spread across Asia with the result that real securities are also considered with suspicion.

3. During the Second World War several countries at war printed and put in circulation perfectly counterfeit enemy money. It is also historically established that some central banks, like the Bank of Italy 65 years ago, issued the same securities twice (identical registered number and code). This way they could print more money with legal tender than they officially declared. The main difference though is that 65 years ago the world was involved in a bloody war, which is not the case today.

Source

Click Here for MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES

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Thanks to Glengarry for sending this over.

The Rest is Up to You…

Michael Porfirio Mason
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AKA The Sly, Slick and the Wicked
AKA The Voodoo Child
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The Rest is Up to You…

Michael Porfirio Mason
AKA The Peoples Champ
AKA GFK, Jr.
AKA The Sly, Slick and the Wicked
AKA The Voodoo Child
The Guide to Getting More out of Life
http://www.thegmanifesto.com

Blu & Exile – “So(ul)Amazing”

Economic Recovery vs. Inflation

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Weekly Commentary
For June 8th– June 12th 2009
By: Matthew Bradbard

Call it what you want but traders make money on identifying an opportunity and capitalizing on it, not the why. To me inflation is a foregone conclusion, the timing is the tricky party. When you have Nassim Nichols Taleb setting up a new fund to exploit volatility and what he views as hyperinflation to come, it is time to gain exposure in commodities. When China is diversifying out of US dollars and Treasuries into commodities, it is time to gain exposure in commodities. The trend has reversed in most commodities from agriculture to metals, softs to energies and we would advise investors to allocate a portion of their portfolios to commodities.

To find out exactly how we are positioning our clients in commodity futures and options, Contact us today at 1-888-920-9997. Don’t forget to tell them The G Manifesto sent you.

Livestock
August live cattle were lower by 65 ticks last week. Resistance comes in between 80.25/80.50 while support is seen at 82.00. August feeder cattle were lower by 5.825 losing almost 6% last week. Resistance comes in between 98.50/99.00 while support is seen at last week’s low at 95.625. With beef prices down it may be a good time to start approaching cattle from the long side. Fundamentals show that beef consumption starts to decline in hot weather, but so does supply as feed lots are short of inventory. Traders should look to enter longs on or about June 18 and hold through February 5. This trade has worked 34 times in the last 38 years. Past performance is not indicative of futures results.

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July lean hogs were lower by 5.425 last week losing 8.5% on the week. Support is seen at 59.325; last week’s low, resistance is at 62.00 followed by 64.00. The US is working on getting China, Russia, South Korea, and several smaller importers to end their ban on buying US pork but until this happens demand is lacking. Health officials agree that eating pork is safe, but lower prices have encouraged these countries to protect their domestic markets.

Grains
The USDA said that 93% of the corn crop was planted and 70% of it was rated good to excellent. July corned gained 9 ¾ cents last week making it the seventh consecutive positive week. Resistance is seen at 4.50 with support at 4.30 followed by 4.15. Weather, planting progress and growing concerns are kept at bay for the time being as Wednesday we get a USDA crop production report; markets expect a drop in ending stocks from last month’s 1.6 b.b. We’re still anticipating getting long December 09’on a break between now and the June 30th USDA planted acreage report.

The USDA said that 66% of the soybean crop was planted, down from the five-year average of 79%. July soybeans strength continued as prices were higher by 39 ½ cents last week. Resistance first comes in at 12.30 followed by 12.55 with support seen at 11.80 followed by 11.45. We continue to hold July puts for clients at a slight loss expecting a break in the next 2/3 weeks. Last month’s report put 09’ ending stocks at 130 m.b. A cut to 100 m.b. or lower would be bullish, outside of that we think the market has factored in smaller ending stocks.

The USDA said that 89% of the spring wheat was planted and 73% of it was rated good to excellent.
The USDA said that 45% of the winter wheat was rated good to excellent. July CBOT wheat was lower by 13 ¾ cents last week with KCBOT giving up 12 ¼. Wheat assumes a follower’s roll to corn and soybeans as wheat does not have the current demand. On CBOT wheat resistance is seen at 6.40 followed by 6.55 with support at the 200 day moving average at 6.11 followed by 5.90. KCBOT resistance is at 6.95 with support at last week’s low at 6.68 ¼ followed by 6.50.

Continue Reading about Softs

To view our full commentary which includes the sectors of energies, livestock, currencies, financials, grains, softs, and metals, subscribe to our 4 week free trial by visiting this link: http://mbwealth.com/subscribe.html.

_____________________________________________________________________________________
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions.