Outlook

We're living in a very interesting time for sure. Oil doubled its price in a matter of few months, grains tripled with in a year, dollar has been continuously getting devalued, gold hanging just under all time time etc...

As many of you know, we're facing two big problems. Inflation and recession. Inflation is from of course high food and energy and the main problem of recession is caused by sub-prime mess. Feds kept lowering rates for market liquidity, which eventually made inflation worse. When Fannie and Freddie were about to go bankrupt, people thought the worst was not yet over.

Feds, however, are dying to raise the key rate to ease inflation and I think that's about to happen soon. In Europe, there's no credit crisis. Their #1 priority is inflation, why they just started their rate, which gives a lot of pressure in dollar, so we do not have much choice. But it can't be done without solving our banking issue.

This week 5 big banks came with a lot better than expectation. I think this might be the bottom of the financial crisis. Smart money was in inflationary instrument (is that a right way to say?) and now it's moving back to equities.

Oil is coming down really hard. Goldman Scachs' outlook on oil is about $200 whereas Lehman's expecting $80 per barrel by end of 2008. Can you believe that two main hedge firms' outlooks are completely opposite. $200 in crude is about $6 / gallon in gas pump.

I'm leaning towards to $80 because I started seeing things that I've never seen around people. Our solutions about high oil were to dig more oil and support oil companies so that they can find better ways to get more oil. What did gov's subsidy do on enthanol and bio-diesl plan? It made things worse not only in oil but also in grains (food). We wanted others to solve problems for us instead of us being proactively find a way.

People are finally talking about changing behaviors. People are looking for 'compact' cars, electric vehicles, less travel etc. The #1 rule I learned from markets is when everybody knows markets do the exact opposite. Everybody things demands in India and China will exceed the supply. I disagree. A lot of it has to do with speculations and the sharp dropping in oil is exactly the proof of that in my opinion.

My money in retirement account has been sitting in money market since Dec 2007. My money was at global and domestic equities, but after I saw the credit problem, I got it out pretty quickly. Sure I didn't exit at the top, but I got out well above where we are now. I look at the funds I was in, it's -15% year to day. I'll look to move my money back there.

Still holding

Not much going on. I'm still holding 2 soybean-meal spread and 2 lumber trades. The spread trade came back to my way, but still far from my targets. I'm just getting really impatient though because when it came back last time and gave me about $5K profits, I didn't take it and it then moved against me quite a bit. I feel as if I just need to get out at break-even. However, that's not what's about trading. I just risked huge amount of money, and get out at b/e???

Lumber is giving me more pressure than before. It looked like it was bottoming out and then it broke the support making a new low. Everybody knows about how bad these housing markets are. I threw an order to sell 1 Sept 230 puts. Lumber has never been to this low and all I can say is it's 'well' below its cost of production. Supply and demand will eventually kick in, but it takes a while for sure.

Buy 4 ES at 1262.25

Results:
-1.5 pt or -$300 (minus commissions)

I did like the setup, but oh well. I'll take this kind of trade every day tho.