BRIM

Roger Bootle and his crew at Capital Economics gave an interesting and rather "nice" presentation today in Frankfurt which I attended, about the world economy. The jist of it all – in my humble opinion was – massive Muddle Through with a Twist of Deflation. The after-speech lunch & wine were good. :)

They see the world in a deflation spiral for quite a long time and do not see governments in the west embarking any time soon on massive re-stimulation once again. That wad was shot. The Quant. Easing (QE) etc. will be more or less used to maintain a status quo of low interest rates, likely for the next 5 yrs. or so. They also foresee massively sluggish growth in the Eurozone overall and elevated unemployment throughout the west (US, EU).

The idea of the Chinese being the Consumer of Last Resort will likely not gain much traction and hence demand side will likely not see much support. Trade imbalances will remain. They also do not like commodities overall in a reduced-demand environment and sluggish growth. I tend to agree. They also see bonds in a massive bubble… but not likely to burst for yet another few years or so. They had no clue about gold. If the stock markets rebound then gold will likely be sold off hard, I think.

In summary : High Unemployment to Stay – Sluggish to No Growth – Little Real Inflation – Lower Oil Prices in the 60s – Lower Commodity Prices Overall – No Bank Lending or Credit as Financial Institutions massively deleverage – Government Spending will likely Increase Further

I can't say I disagree with the outlook ... however, the markets are not the economy, and vice versa. The markets are an animal unto themselves. That's why trading is like herding cats - you gotta pick one or two and stay with it.

Soooo, sounds like a good time for a major war. That always kick-starts an economy somewhere…

[In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month.]
Full Monty here

The more one reads these ridiculous PhD Economists declaring recessions to be ended, one starts to figure it all out - SPIN keeps the masses sedated and hoping for better times. Hope really is the opium of the masses.

Funny, but with a recovery underway, why are all of Obama's economic advisors jumping ship ? If there was a "recovery" they would surely not hesitate to take credit for their wonderful stewardship of the US economy.... but, wait, maybe there is no recovery !! But wait, the NBER bastion said there was.... OK, we are headed for good times.

It's Tuesday...and I'm in a cranky mood. Hope really is the opium of the masses.

This first video is interesting from Roach. Has nothing to do with gold, but informative.

One of the most interesting facts out there on the gold scene is that very MAJOR gold mining companies are closing rapidly their hedge books.

Because hedge books imply a "managed price" out along the forward curve... so obviously if gold prices start moving higher, those hedges lose money for the company verses the real market spot price.

So if the "big sophisticated gold boys" are closing hedge books... they might be portending higher prices forward. Remember, these companies are very professional. So I tend to be interested what "smart money" is doing...

Many people have constantly called gold a useless investment.

The "useless investment" has gone up 500% in 10 yrs. While the Nasdaq, Dow and other major markets have lost money. The "sheeple" will never understand and they too will be fleeced in the next years.

My personal conviction is that the only way to hold gold, is to hold it in both physical form and via the mining companies. This because the volatilty of gold is tremendous (is the gold price "managed" by the big banks? maybe). But all "managed" positions in any commodity can be overcome in the marketplace.

Owners of gold should be anybody who fears the ongoing debasement of paper money - either through massive inflation or via "competitve devaluation", which is another word for government intervention to the exchange rates. THEY, are all doing it. Switzerland, Japan, UK - they all want a "cheap" currency to help their exporters. Consumers get screwed.

In Dollar, Sw. Franc, Euro and Yen terms, gold is smashing higher and higher - since years. The public is clueless. They hold worthless paper .... which loses more and more in purchasing power. If you bought 10 yrs ago, your purchasing power has increased phenomonally. But nobody tells you that because they cant earn any commission fees on gold.

Wake up or wither dear reader. The only warning about owning gold or silver is they are massively volatile in price action - if you cant take volatility, then step aside. But you may regret it one year later.

We have been positioning our clients in gold and silver since years - needless to say, they are very happy indeed.

Good evening, - Will keep it short as the weekend is right around the corner.

It looks like stops were triggered overnight as it broke above 1127 in S&P futures (ES), making a high of 1132.75 in Globex session. However we opened much lower at 1125.75 and closed below yesterday's close, which signals weakness to me. The Euro also selling off towards the afternoon with AUDUSD move down 100 pips from the high also signals that the risk on trade overnight might be short lived for now.

For the trading I had to trade long in the ES to protect against the short calls from 1120 and up, which saw me lose 6 points in total on the day. Overnight I actually sold a bit more 1160 and 1150 calls for October and November in case this break turns out to be a false break. I also turned the short calls at 1120 into a short straddle position with selling the 1120 puts for October.

Basically sitting with calls from 1130 to 1160 now, with puts from 1100 and downwards to 1060. I always try to stay as dynamic as possible and follow the market and adjust to new developments and I will continue that very much next week as I would like to increase the distance between some of the strikes a bit, especially if we move above 1135 I will roll some of the 1140 and 1150 to higher strikes.

This week turned out more or less flat, but I am very well positioned if the market would break lower at the moment. If it breaks higher I have to make further adjustments, but expect the volatility then to drop even further, which would help my short options portfolio.

Have a great weekend, take care

That gap at 1108.25 in ES (S&P futures) was finally closed Thursday on September and the market opened higher following better US weekly jobless claims data. But since we moved to the Decemeber as front month and that is about 5 points lower the gap is actually still open. So the gaps to look for are 1108.25 and 1054.25. Where a lot of traders rolling their positions to December contract and it turned out to be a range bound session.

Good summary of the day by Mr. Topstep, see link: http://mrtopstep.com/2010/09/09/big-roll-in-sp/

On the trading front I was caught a bit too short on the spike up on the weekly claims and had to make some changes based on that. I took profit on the short 1070 and 1080 calls to make sure I didn't have to worry about them if the market breaks lower as they were just valued at 2.50 and 4.5 respectively I made sense to close them and sell some 1110 short puts instead to get more premium out closer to market, so a larger move will not suddenly make some out of the money puts rise tremendously in value.

I made about 9 points trading long in the future on the day, but it was still not enough to make up for the rise in value on the outstanding calls. I did also sell a bit more 1120 calls for October and also added a new 1130 short calls to the portfolio. I also closed the 1090 in the money short calls I had for September for a loss, but of course that loss has been traded in long on the futures side, so I am not left with straddle at 1110 for expiration 17th of September, with more short calls at 1100 for same data. Also have some 1090 short puts for 17th of September.

For October expiration I have 1090's, 1100, 1120 and 1130's short calls and to the downside I have 1040 and 1030 puts. Very little economic data Friday, so not sure we will see any major move, so hopefully I can leave current portfolio over the weekend and start to move some to the September calls off the portfolio start of next week. Have a nice day

• Capital Economics

Frankfurt, Germany - Thursday, 23 Sept

• FT Ukraine Investment

Kiev, Ukraine - Monday, Tuesday, 27-28 Sept

• Ukraine-Berlin Wirtschaftsforum

Berlin, Germany - Thursday, Friday, 21-22 October

• Gold & Silver Fair

Munich, Germany - Friday, Saturday, 5-6 November

• Sustainable Energy Conference

Amsterdam, Netherlands, Monday, Tuesday, 26-27 October

• Other Locations We are Visiting

Zurich, Kiev, Moscow

Good day.

Quite slow day Wednesday as the S&P recovered from the weakness seen in Asia and opened at 1092 trading up to high of 1103. Remember we have that falling resistance from the April highs coming in that 1102 area and it was not really able to break clean above this level. Still have the gap at 1108.25 from 11th of August to be filled and the 1054.525 gap from 31st of August as well to be filled.
Seems to be more and more people calling for a move lower based seasonals that market is normally weak in September and October. However I am not so sure, I see this week's price action and the reaction around this 1100 to 1110 areas as key. Although the key upside level to break for the bulls is 1126.50, I reckon that if 1110 gives way it could be testing 1126.50 rather quickly. On the downside I see 1080 as key support and a daily close below this level opens for a move lower again and that 1037 level is of course key support level.

As for the trading, Wednesday I made 2 points on the futures net, trading long and short, still a bit reluctant to chase it above 1100 as that key resistance zone has contained the upside well so far.
The only change I made to the options was to sell 1120 calls for October for 16.25 points and selling 1080 put for September for 8.50 points. I did close the 1050 puts for a nice profit, was kind of a roll to the 1080 puts to get a bit more premium in and leaving more gap between the 1070 to the 1040 puts in case we have a move lower. Still have most exposure to the upside above 1100 basically with calls at 1110 and 1120. Will look to make adjustments when we move out of the 1090 to 1105 range.

Little to report for Tuesday, generally slow day.

The S&P futures made an initial push higher overnight Tuesday, but it was never able to reach that 1108.25 level that is the gap from the 11th of August low. The gap from Thursday down at 1090.50 was closed in today, so the next downside gap is 1054.25 now from 31st of August.

Trading wise I did very little today as the market was more or less rangebound. I did took off a bit of the hedge on the long calls at 1094.25 as it looked to go lower, I figured it was less need to hedge the upside and I additionally sold 1110 calls for 17th of September.

Expect more action Wednesday.

go home

The point is that in this current trading range it is telling us that there is almost no conviction in "this recovery". The Central Banks have pumped trillions ... and this is what we get ? Anaemic markets. It is more exciting to watch paint dry.

But out on the deep horizon we continue to be cautious of this "recovery". It is a recovery predicated on easy money from the government "money printers". They are desperate for inflation... in a deflationary environment.

We continue to be interested in precious metals, agriculture and some technology companies. Government Bonds anywhere look like a joke. Germany might be the best of them.