Broad Themes and Extremes (FCX,UUP,AAPL)

Broad Themes and Extremes (FCX,UUP,AAPL) We’re going to revisit some of the themes we’ve been pressing over the past six months, particularly as they relate to the commodities, as it’s there we see the week’s best opportunity to write a trade. But before we do, a little background. The current move higher in the dollar is not over. We’ll get more upward pressure over the intermediate term as a function of a number of inputs, and we’ll discuss a few of those below. But take it as near a certainty as you’ll find in the financial world these days, that barring a cataclysmic event in Washington or Wall Street, the buck’s bounce is a buy. And what does that mean for commodities? Well, in a world where financial rules and inter-market relationships still applied, we’d tell you that a move higher in the dollar would be negative for commodities. But today we don’t think so. And here’s why. Commodities got a pant-whacking over the past eight years – one that puts AG Schneiderman to shame. Across the board (almost), the entire asset class was trounced. And now, selectively, we’re seeing a return of funds to the ‘thingy’ sector. Energy in…

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I’m Having An Attack! (AAPL,SPY,USO,FXI)

I’m Having An Attack! (AAPL,SPY,USO,FXI) Isn’t it always the case…? The news is horrible. The threats are palpable. The rhetoric and bombast are as hot as ever. Suspicion and anger are ubiquitous; finger-pointing; mud-slinging; muck-raking; belly-aching… For gawd’s sake, my meniscus has been twice herniated, my pylor valve is stuck, and I just burned the honey-garlic spaniel! The kids are gonna kill me… The Decibel Level Climbs When the news is not reporting the Mueller/Trump duel, it’s all about rising oil, with 1) Iran and the potential loss of three and a half million barrels of daily oil supply, or 2) Yemen trying to take out Saudi oil infrastructure, or 3) Israel gearing up for a takedown of Iran in Syria and Lebanon, or 4) Venezuela, whose oil production is veering toward zero, as funds to pay for the extraction of that country’s vast reserves go squandered or missing or who knows where. And now Warren! This week it was reported that Señor Buffett had his first losing quarter since 2009, reporting over a billion bucks lost for Q1. The damage is everywhere. And here’s what’s worse. From Wall Street we’re seeing growing concerns that the breadth of the market…

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Out With the Old War, In With the New-USO,IYT

If it looked like happy days were here again after the Korean Peninsula appeared to be cooling, just take a look at the South China Sea and the Middle East.   In the former, tensions between Mainland China and Taiwan are flaring again, with the communists declaring in both word and deed that it’s only a matter of time before ‘reunification’ takes place.  War games and exercises on both sides dominated the news this week and last, as everyone positions himself for a show of strength and urges his opponent to take him seriously.   From there, hop over to the other side of the Eurasian land mass, where Israel has announced what many already knew to be the case – that Iran is doggedly working on its nuclear arms program in locations hidden from IAEA inspectors.  The Israelis claim to have a trove of evidence to prove the case, and it appears the major western powers are about to send inspectors into Iran with the Israeli documents to check if, indeed, a violation of the Vienna Accords took place.   If that’s the case, you can almost assuredly expect the U.S. to drop their support of the deal, recommit…

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Y’wanna Buy the PetroYuan!? (FXI,USO,MSFT,FB,XLK)

Y’wanna Buy the PetroYuan!? (FXI,USO,MSFT,FB,XLK) If we’re on the cusp of a new bull market in commodities, as we here at The Modern Bull believe, then the winners and losers will be clear cut and big. But when it comes to measuring the impact of rising energy, metals and foodstuffs prices, it’s very hard to determine how China will be affected. The reasons for this are manifold, and not least because that country is among the least transparent when it comes to all things economic – and, of course, because free markets don’t operate there as they do in many other parts of the developed world. China is among the world’s largest producers of farm produce – much of which ends up supplying domestic demand, though a great deal, too, is exported. At the same time, it’s the globe’s biggest importer of oil and gas, as well as many metals. So what’s the net effect on a country like China when, say, oil prices jack up sharply, as they have in the past few months? To put it in its most general terms, China’s markets and wealth are very closely correlated to global commodity prices, something that cannot be said…

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Cobre, Por Favor (ECH,EWZ)

Cobre, Por Favor (ECH,EWZ) We’re turning our investment focus this week to a corner of the planet we only occasionally visit, but that we feel is becoming more and more worthy of our attention as the geo-political storm winds begin to batter the region, and financial opportunities present themselves in abundance. It’s Latin America, and the trade we intend to launch is a play on the extraordinary wealth and prosperity possessed by the region, on the one hand, and the growing desperation and poverty there, on the other. The latter, sadly, is largely the result of gross mismanagement, corruption and negligence. But first some background. The ails and travails of Venezuela have been documented in these letters for years. A nation that was once wealthy from its vast oil reserves, the country has since been plundered by doctrinaire socialists and power hungry apparatchiks to the point where nothing is left but a military that is loyal to the ruling clique (who until now have managed to pay them) and an increasingly impoverished citizenry that has nothing to lose by dying in the streets in an effort to improve their lot. Venezuela Not Alone But Latin America’s violence and corruption are…

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Oh, To Be Young Again… (MSFT)

Oh, To Be Young Again… (MSFT) It’s a truth seldom questioned that the young have it best. After all, they’ve yet to suffer life’s slings, the challenges of marriage and child rearing, the uncertainties of earning a livelihood and the timely – and untimely – passing of family and friends. And yet there are times when even youth lose hope – when even twenty-somethings consider the prospect of building a life and realizing their dreams to be onerous and grave, and not as Shakespeare once put it – Could it be that today we are witnessing the passage of such an age, when the young are mournful, and the aged more stout? A look at the following chart from Deutsche Bank Research offers some shocking data. Is it possible that for the first time – possibly ever – the young possess less spirit than their parents? Have a look – True, we’re talking about consumer confidence here, but that generally spills over into other areas of life, no? Put plainly, this is the first time that reliable data are showing those over 55 possessing greater optimism for the future than those under 35. Remarkable. Just this month. First time ever….

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We Are Investment Artists! (AAPL,GLD,TSLA)

We Are Investment Artists! (AAPL,GLD,TSLA) We at Normandy prefer the use of options because of the (mostly) limited liability involved in their use, as well as the wide variety of strategies and structures they afford the interested trader to employ. Nearly any price projection you might make has at least one corresponding options strategy available to profit from. In short, options are, in our view, the premiere weapon for the prudent investor in this age of increasing financial and geopolitical uncertainty. We mention this now, because we’ve clearly entered a period in which excesses in valuation and government intervention have made predicting market moves a far less quantitative operation – less scientific, if you will – and turned it more into ‘artisanry’. The new keys to investment and speculative success reside in a number of less widely-used indicators, basic technical analysis and in-depth sentiment study, all of which we at Normandy excel in. Give us an example, McAbby! A look at traders’ positioning in VIX futures is instructive in this regard. Below is a chart of traders’ speculative posture in VIX futures over the last three years. It makes clear the overwhelming shift in sentiment that occurred literally ‘overnight’ in…

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Sit Down and Prepare for an Explosive Bull Movement! (QQQ,TSLA)

Sit Down and Prepare for an Explosive Bull Movement! (QQQ,TSLA) In last week’s Options Trader Elite, fellow scribbler Matt McAbby discussed the current state of the commodities and left you with a trade on the entire complex using DBC as the underlying. His discussion included closer looks at oil and gold, among other things, and suggested a breakout in either or both was just a matter of time. Today, we want to revisit his work and take a slightly different tack with regard to crude oil in particular, because we believe there could be a lead-laden shotgun trade for anyone who points his investment weapon in the right direction. So, to review… Geopolitics We’re sitting at what appears to be the beginning of a serious regional conflict in Syria, one that may eventually pull in some of the world’s largest armies, at least five of which possess nuclear armaments. Predictably, the latest round of exploding projectiles in the Middle East has also stoked the energy complex, with Brent Crude breaking to a new 40 month high just last week. And that, as McAbby suggested, will likely spur a great deal of technical trading in the weeks ahead. And yet a…

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Stoking the Commodities (DBC)

Stoking the Commodities (DBC) Last fall, we suggested that by year end America would either be engaged in military hostilities of some sort with North Korea or would come away embarrassed, chastened and looking every part the fool. It didn’t happen, of course, because a back channel for negotiations was eventually set up, and North Korea is now openly suggesting it would give up its nuclear program under the right conditions. Is it a victory for the bombastic ones in the administration, who threatened and cajoled and all the while turned up the temperature on North Korea? Time will tell. It’s hard to say at this point who was bluffing, who was buying time, and who’s truly ready to follow through. What’s important to us, however, is that amid all the blather of war and the tit for tat twitter spat, the market shot heavenward in unprecedented fashion. And then… Following that, it was the so-called “trade war” with China that captured everyone’s interest. Again, the threats ensued, followed by an incremental ping-pong imposition of tariffs and levies amid growing concern that the world economy would be devastated and a new shooting war might even begin. Yet here, too, it…

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She Thought She Was Going to The Dentist… (TSLA,QQQ)

She Thought She Was Going to The Dentist… (TSLA,QQQ) When I was young I had a friend whose father used to repeat the same lesson to him over and over again. His dad was an Englishman, so it helps to hear his words with that distinct pompous accent that accompanies so many who hail from the Land of the Rose. He used to say: The only ship you should never embark upon is a partnership. Can’t tell you how many times I heard that. As it turns out, we parted ways when I was 11 or 12, but my buddy (we’ll call him Denny) grew up to be a professional thief. I read about him several times thereafter in the papers, always with pictures on his way into or emerging from a courthouse, accused of every possible white collar deceit you can imagine. Did seven or eight years – twice – last I heard. The good news is Denny never had any accomplices, from what I understand. Respected his father, old Denny, after all. There’s something to be said for that. Let’s go 50-50! We got to thinking about our old comrade because the market today is splitsville, schizo-undecided, with…

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