Tuesday, November 23, 2010

Swapped out puts for a long Dec VIX pos

In reference to my earlier post Uptrending Equity: VXX should no longer have massive decay,  now Dec VIX is trading at a discount to the VIX index, while Jan VIX is still at a pretty good premium.  So I'm swapping out my SPY puts for a long Dec VIX position.  I'm in the money a fair amount on this trade from just the last few days

Monday, November 22, 2010

Good article summing up why I'm so gung-ho about long gold & silver right now


Soros explained it well, saying we are actually experiencing deflation while everyone fears deflation.  Pento is also smart in saying that the bull trend will not end until real interest rates are positive.  People like to call gold an "inflation hedge," but the data actually shows that gold performs well when US interest rates are kept low, and poorly when US interest rates are increased to counteract actually high inflation.  People point at particular things, like the recent rise in commodity prices, to say that we are experiencing inflation.  There is much more to inflation than commodity prices.  Specifically, housing, which is a huge component of actual prices, remains dismal, and there is a big output gap with all the unemployed.

Yes, gold and silver are the next bubble.  That is why you should buy it.  Your job as a trader/investor is not to pick tops or bottoms.  The trend is your friend.  Long!

Friday, November 19, 2010

Refining margins screaming

Prices of gasoline and heating oil over crude are screaming higher.  WNR has already moved, but many of the refiners haven't yet really priced in the move.  VLO looking great for a several month swing long.  Watching 22 area.  Should be worth at least 40/sh, imo.

Wednesday, November 17, 2010

VXX should no longer have massive decay

At this point, VXX owns almost entirely Dec VIX futures, which aren't trading at much of a premium to the index anymore.  But Jan VIX futures are still quite pricey, so I'm short that against some ITM SPY puts with IVs under 18%.  Not trying to lose too much time premium.  If Dec VIX futures begin trading at a discount or in line with the index, I'll swap the puts out for a long Dec VIX.  The pair (long Dec and short Jan) will be a slightly bearish on the mkt, since Dec will move more in line with the index.  Will keep that in mind.

Tuesday, November 16, 2010

Muni bonds

The carnage in muni bond ETFs (there are hundreds, just google them) seems to be now spilling over into some other bond ETFs, such as PHK and PGP, which are trading at steep premiums to NAV.  Maybe this will be the catalyst to cause them to revert to their NAV values (at the time of this writing, $9/sh for PHK and $14/sh for PGP

Tuesday, November 9, 2010

Monday, November 8, 2010

Inexpensive insurers

AWH, RNR, VR are insurers with great fundamentals and are hitting price highs.  They should go a lot higher.

Gold and silver new highs pretty much daily.  Zoom zoom!

Wednesday, November 3, 2010

Killed it on short TLT, long GLD plan for QE2 announcement

Wow, news was to buy even more long-term T-bonds than expected, and T-bonds still got railed.  Classic "sell the new" play.  Imagine how much I would have made if they talked more about easing in other ways!

Monday, November 1, 2010

Getting ready for Bernanke comments on QE2

I usually hate to come into news events with any kind of fundamental bias, and no matter what is spoken on TV, the big boys will ultimately push the markets wherever they want.  However, in this case, this is what I'm thinking going into this event:

  • Historically, Fed days are up days in the equity market, as the fear leaves the market upon words being spoken.  There is a fairly strong upside edge to being long equities going into the Fed day.
  • Last time QE2 was mentioned a few weeks ago, EVERYTHING (equities, gold, T-bonds) ripped higher
  • The market has been prepped by thinking that QE2 will be done through the purchase of T-bonds.  I haven't come across anything in which people have considered many other methods of QE (this is the key point for my pre-news trade)
  • PIMCO, which recently seems to have a direct line w/ Bernanke, has been selling volatility in T-bonds ahead of this event, meaning they don't think the news will move the T-bond market much.
  • Equities and gold have been pretty strongly correlated, probably due to their inverse relation to the low-interest-rate US Dollar.  Gold has generally been stronger than equities, as it should be, as virtually all global central banks would love to debase their currencies at this time.
Taking all this into account, I want to be long gold/silver hedged with short T-bonds.  My thinking is that if anything is uttered about easing through means other than through T-bond purchases, gold/silver will leave T-bonds in the dust.

Wheat contango and other ags

Prices of many ags continue ripping higher.  Any trend-following system would be long a bunch of them and raking it in lately.  In constrast, wheat is struggling to make any headway as the contango widens even further.  Stay short long-dated wheat futures and long other long-dated ag futures

Silver squeeze may be imminent

In the past couple years, I've read much about the supposed shortage of silver, and run through official government websites to see who's holding most of the open short interest in silver and gold, and came to basically the same conclusion as the gold and silver bug conspiracy theorists about commercial bank-dealers (specifically, JP Morgan) holding huge size short.

Now I read an interesting rumor about some other major players possibly going for blood.  http://www.zerohedge.com/article/are-asian-traders-preparing-major-squeeze-silver-shorts

Should be an interesting market going forward.  As expressed earlier, my opinion is that economic fundamentals support a much bigger move upward in the coming years anyway.

CDSs on Cardinal Health (CAH) widen

As mentioned here, price action in CAH CDSs indicative of an imminent LBO: http://www.zerohedge.com/article/lbo-cardinal-health-imminent#comment-677815

Great arb with a great chance of making money no matter what happens would be to pick up Dec or Jan calls with IVs below 30%, and short some CDSs against it.