I'm going to wait for OJ to base out..I still think it is a bit premature to commit to the big longs in OJ. selling puts is a nice strategy in here as long as long as you keep it kind of humble because I don't know if OJ will put in a big-wide base like coffee has done. OJ is a different beast. It moves slowly, unlike coffee that is extremely volatile. Coffee is to the softs as natural gas is to the energies. So if you want volatility, natural gas and Coffee are incredible to trade.
Over what time period is coffee more volatile than OJ? Check out the 30-year charts: http://www.mrci.com/pdf/charts.asp You still think coffee is more volatile?
When coffee gets rolling, coffee is the most volatile commodity out there. There are periods when this has happened, like the early 1990s. The richest day trader that I've ever met made all of his money in coffee because he would take advantage of the frequent 3% to 5% intraday swings. That's what I'm talking about.
Have any of you actually looked at the supply/demand situations in some of these commodities. Rogers cites this as his main reason for being bull. However, I took a look at the 2003 CRB yearbook, and I cannot really see any huge imbalances. I am not saying Rogers is wrong, I am just saying that it is a bit tough to see where he is coming from. For instance, his favorite commodity is lead, but looking at the supply/demand figures, nothing looks terribly out of whack. Any ideas what Rogers is looking at? Personally I think Rogers may just be going on a hunch. He figures with China, Russia, and other emergin markets developing quickly, and with little to no new capacity investment, a bull market is likely, whether it is apparent in the numbers right now or not. Any thoughts?
I think Rogers looks at the pricing of commodities from a holistic approach which takes into consideration supply/demand, the currency exchange, the economy of the diff countries. The problem is he is perenially bullish/ bearish for years which really doesnt do me any good. Sorta like Precther who will call market blowoof but be 3 years ahead or behind. Like the broken clock being correct twice ina day. What good is anyone's call in sugar if there is a wide timeframe?
I agree with your comments Gat! Sometimes insight can kill your trading. If most people listened to Prechter they'd all be bancrupt. As for Rogers, I think he has a lot of forces on his side for the commodities bull market, namely the trend which has broken out of a 30 year bear market.
Rogers was way ahead of the curve on commodities. Starting a major fund in '98 was one of the greatest calls in his career. In many of his articles and interviews, he states: War is inflationary. His thesis is, we are in a constant state of war. Paper currency around the world is being inflated away. Commodities and physical goods will hold their value better in the coming years. Excess inventories have been worked off (i.e. end of the cold war). Supply is also down because no one has invested in productive capacity. Demand will continue to boom in emerging markets. China alone will be responsible for a huge uptick in world commodity prices. They use to be net exporters in certain items, now they import.
JBTrader, I have read Rogers' case for the commodities bull market. The demand side of the equation is a no brainer. Per my last post, it is the supply side of the equation which I am finding less easy to read into. I have looked at the CRB yearbook, but there are really no apparent imbalances that I can see. Rogers is very bullish on lead, but if you look at the figures, nothing looks terribly out of whack? I think he has just really done his homework (big surprise) and knows that no one has built of lead mine or refinery in a very long time, so in due course, the figures will start to show real imbalances. And by that time the CRB will already have made three quarters of it move. Don't forget one thing though, crude makes up over 40% of his fund. In 1998 crude was $15. I would like to know how the fund has performed net of energy. I think the returns would be much more modest. The moves in beans and copper are offset by Orange Juice, Sugar, and Cotton. And then you have the things like wheat and the meats that haven't done much of anything.
Those returns, net of energy, would probably modest for now....but how about in 3 years from now. I think that the meat of the move has not yet begun for commodities. I don't know how this will play out, but I still see Gold going sky high into 2008-2010.
His fund is rebalanced annually to keep the oil component from overwhelming it. Not sure how it would perform net of that. He is well capitalized enough now to sit for years and try to capture these really long moves. I don't doubt that its very difficult for most of us to replicate this type of trading, and 99% of the people on these boards are just trading for ticks anyway. If the length of the real goods bear market is any indication, the bullish move is just starting. Of course, we will probably have some kind of event (Rogers thinks its a bump in China) soon that will shake most longs so they all miss the big move. That would hurt the most people and be the hard trade to hold.