FYI | Jan 10 2007
It’s good to be back.
I hope you all had a nice and wonderful Christmas and end of year break. Judging by the out of office emails that return after we send out our daily emails, for some among you the break isn’t over yet.
Thanks for all the Best Wishes. It goes without saying the whole team at FNArena sends you all their Best Wishes for the new year. With great delight have we noticed that our December promotion, which included a copy of the book Investing in the great uranium bull market, has been a great success.
Even though our friends at Stockinterview.com have been very generous to us in shipping more copies than they promised, what once was a huge pile of hard copy books is but a rather tiny one now. And the overall feedback from those who did receive a copy of the book has been positive without any exception.
Overall we had enough reasons to sit back and relax over the festive season, have our glasses filled, our internal batteries recharged and simply chill out.
And that’s exactly what I haven’t done this year.
I traveled to Queensland instead to spend seven days in Woodford, at the annual music festival. Officially it is labeled a “folk festival” but I can assure everyone the festival has far outgrown its original roots. Eighteen venues (nineteen if the open space on top of the hill is counted as well) offering the likes of John Butler Trio, the Umbilical Brothers and Tripod –I am just picking a few names which I assume will trigger instant recognition for most of you- turned my maiden visit to the Sunshine State into a finger licking experience from the first day until the very last morning.
I had the best time in many years attending more than 50 concerts and other events in the course of a week. The climax came when I discovered Martin Hayes & Dennis Cahill. The first is an Irish violin virtuoso, the second an American guitarist who doesn’t mind playing second fiddle. They played four times at Woodford. Three times I was in the audience. I think the facts speak for themselves.
All that time I was unaware of the fact that commodities markets had fallen victim to funds selling from the moment markets re-opened in 2007. According to one commentator, last Friday there was “panic” in the markets. It certainly has been the most asked question from you all since my return: what now with metals and oil?
I think it is best I leave the answer to the question to Dennis Gartman, whose newsletter I read daily and whose insights and market knowledge I cannot praise highly enough. Gartman’s reflections on the early January onslaught in the commodities markets is without any doubt one of the best analyses I’ve come across thus far. (And I read a lot, as you all know).
Said Gartman: “The panic appears to be over; however, we must remember that the long-only funds and the CTAs [Commodity Trading Advisors] out there have been caught totally, utterly and completely off-sides on their positions. Many have not sold as they need to sell, and in the case of the CTAs, their “systems” have not yet turned bearish sufficiently to have touched off all of their long liquidation and certainly have not turned sufficiently to touch off bearish, short selling positions. Both will occur.
“Thus there is plenty of over-head selling yet to be done, and if it is not done today, it shall be done tomorrow, and if not tomorrow then later this week.”
Later he continued: “Simply put, so much technical and “psychological” damage has been done to the commodity markets in the past week that it may be weeks before a sustained bull move can evolve. The margin clerks have to be satisfied that their firms are covered and that the “specs” have been properly liquidated. The violence of the past week’s move lower has to be effectively forgotten by the specs, and for a while, like Mark Twain’s cat that sat upon the hot stove and chooses not to sit upon any stove again, the public’s interest in owing “stuff” has for the moment been far more than sated.”
Forget about long term Super Cycles, supply catching up with demand and inventories re-building, or even China holding the key to the commodities outlook: the three paragraphs above tell us everything we need to know about what is happening in the markets right now.
Only when this process is completed will underlying market fundamentals kick in again.
Time for renewed rumours about how certain hedge funds have sunk into deep trouble territory. Oops, the rumours have already started!
Interesting times indeed.
(Before I finish off this week’s musings, here’s what investopedia.com has to say about CTAs: An individual or a firm, registered with the Commodity Futures Trading Commission, that receives compensation for giving people advice on options, futures and the actual trading of managed futures accounts. Registration for CTAs is done through the National Futures Association, a self-regulated organization responsible for reviewing and accepting registrations.)
Till next week!
Your still in a Martin Hayes & Dennis Cahill trance editor,
Rudi Filapek-Vandyck
(As always supported by the Fab Three: Terry, Chris and Greg)