Sunny Day

Sunny Day
Sweepin' the clouds away
On my way to where the air is sweet

Can you tell me how to get,

How to get to Sesame Street

Come and play

Everything's A-OK
Friendly neighbors there
That's where we meet

Can you tell me how to get

How to get to Sesame Street

-My proposed new theme song to Squawk Box
I am at a loss for words at this point. The market has gone up unabated for four straight months. Nearly every sentiment indicator I look at is sitting at multi-year extremes, yet has not mattered. Everybody is forecasting a great year in 2011 except for a few perma-bears. None of this seems to matter as the market is just not reacting to any extreme other than a brief pause here and there.

This is not the type of market I prosper in as I am more of a mean reversion trader than a trend follower. Surprisingly, I have been able to pick my spots in the past four months and have navigated this market pretty well. This is the first time I have been caught short since the rally started and even if my puts expire worthless it will only be a small pimple. That said, going forward it will be increasingly difficult for me to perform if we do not get a correction as the pockets of value I have been able to find are disappearing and my uncomfortableness is growing.


nicasurfer said...

What are your thoughts on a single trader holding 80-90% of the copper in an lme warehouse. Sounds very similiar to when rice was going extremely high on supposed demand then they found people hording rice.

Just a thought maybe we aren't growing as fast as everyone thinks

I think FCX is a prime short here

Tsachy Mishal said...

I think that as commodities rise eventually there will be the realization that Bernanke has to back away from QE. That point of realization will likely be the spot to short commodities.

My best guess is it will occur with oil at $100 or when the rise in commodity prices hits the mainstream media. I'm not referring to gold and silver prices rather commodities that consumers have to pay for like food, oil, cotton etc.

Anonymous said...

commodities are just that, commodities. A market that anyone can break into, given time and capital. Capital is cheap these days, so it's just a matter of time before we get more supply, assuming it's possible to make a profit at current prices (which I assume is true).

It's always the same story in commodities. High prices attract new supply, but with a long time lag, and the long time lag allows prices to go still higher, attracting still more new supply, until finally all the new supply comes online and the price crashes.

Anonymous said...

I have already posted that I see further gains in 2011, BUT there most definitely WILL be corrections.

PJ said...

I think the commodity crash comes quicker than Anon realizes. Already the Australian economy and US imports from China are turning down, and Chinese inflation is a year old, suggesting China is turning down which takes away the biggest commodity buyer. I'm expecting US, European, and Japanese economic downturns to be underway shortly too.

Meanwhile $120 bn of mining expansions or developments have been announced globally.

I think most of the commodities peak by January 3. I've just put on a copper short. Cotton went limit down today. That might be the bellwhether.