123's blog

[123]

Next trading candidate: Wheat

Wheat rose the most in more than a week on signs Asian countries are increasing purchases after prices fell 32 percent since reaching a record in February.

Bangladesh said today it wants to import 100,000 metric tons of wheat; South Korea's largest food processor, CJ CheilJedang Corp., issued a tender to buy 22,000 tons from the U.S.; and Japan said it bought 12,760 tons. U.S. exporters sold 454,200 tons in the week ended April 3, up 70 percent from the previous week, the government said last week.

The world has "never been less secure" about the near-term future of wheat as crop failures and disease combine to threaten food supplies, U.S. Agriculture Secretary Edward Schafer told food aid groups Wednesday.

Schafer told the International Food Aid Conference meeting that crop failures have left global wheat stocks at their lowest point in 30 years and U.S. wheat stocks are at 60-year lows. Climate changes that have spawned unrelenting drought, floods and late freezes have all had an impact.

Wheat futures for July delivery rose 28.5 cents, or 3.1 percent, to $9.39 a bushel on the Chicago Board of Trade, the biggest one-day gain since April 4.

Among the agriculture family, corn, soybean, coffee, cocoa and sugar had all recovered from the recent commodity correction. Wheat has been lagging behind, which in my view presents a great buying opportunity.

I had bought Wheat call option, strike 1050, July contract at $50.

Wheat chart can be found here:
http://basemetal-trading.blogspot.com/

 

[123]

Why gold has to go up?

Since 2001 oil and gold have been trading at close correlation. Recently we have seen oil price rising to new high US$114, while gold is still trading at US$934 (below its previous high).

So based on this history, gold should rise above US$1000 again, and reaches new highs.

Gold will remain well supported by recession fears in the U.S. and the potential for an economic slowdown spreading to other parts of the world. Furthermore, continued dollar weakness is expected, which will support higher gold prices through 2008.

Vested in Comex Gold call options.

Correlation chart between gold and oil can be found here: http://basemetal-trading.blogspot.com/

 

[123]

Cheaper and safer way to trade oil

As oil rises higher and higher, many people are pointing to the issue that a bubble is created. Is there really a bubble? Or is oil high price a reflection of its tight supply?

In my view, high oil price is just a reflection of its tight supply. And there are 4 main factors pointing that oil price is going to move higher:

1) Growth in Emerging Economies --> Rising Oil Consumption --> Higher oil price

2) OPEC --> Government depend on oil income --> Cartel restricts supply --> Higher Oil price

3) Geopolitical Issues --> Cause disruption / thread of oil production --> Lower global spare capacity --> Higher Oil price

4) Peak Oil Theory --> Declining Oil production --> Less Supply --> Higher oil price

I believe oil price is going maintain its uptrend in the mid-term. I'm predicting oil price to reach $250 in 2 years' time.

Many of my friends and colleagues frown and complain whenever they read and hear of oil price rising to a new high. Think about it from another point of view, it is a great opportunity to make money!!!

The most direct way is to tap on rising oil price is to buy oil futures. But the contract size of crude oil trading at Nymex is pretty huge, man-on-the-street will find it harder to stomach the risk. For the big oil contract, $1 movement represents US$1000 in your profit & loss. As for the mini contract, $1 movement represents US$500, still quite high for a normal employee.

ForexYard's platform allows their customers to trade oil based on contract size of only 100 barrel. This means that $1 movement only represents US$100. So if you wrong $5 on the oil, your P&L is only down US$500. For the same situation, if you trade mini oil future, your P&L will be down USD2500 (possibly 1 month's salary gone).

And it charges no commission. I HATE to pay commission to brokers who do not add any value. I think this contract size is pretty affordable, and risk level is comfortable to most people.

Click here for details.

 

[123]

Time to buy Asia and Emerging Funds

Despite the downturn in US market, there is a GOOD chance that asia and emerging markets will continue to report strong economic growth and above-average expansion in corporate profits.

Lower demand from US and the expected economic slowdown in the Eurozone are affecting the asia and emerging markets LESS severely than a few years ago for various reasons. Lower exports to the US are being offset by higher exports to other emerging markets.

SURGE in domestic demand is becoming an increasingly important growth driver in the BRIC countries (Brazil, Russia, India and China) and Mexico. This is due to rising wealth levels, higher consumer demand and strong investment demand, a result of instrastructure projects.

Many of good asia and emerging market shares are down 30% - 50% due to broad market pessimistic sentiment, but their fundamentals just get better and better. HUGE gap between the fundamental of the business and valuation of the stock presents great money-making opportunity.

Since two weeks ago, I had been writing articles entitled "stock that may rises 100% in 2 - 3 years' time", from Part 1 to Part 8, 8 stock ideas in total. Click here for the summary.

But some of my friends and readers had reflected to me that stocks investment are too risky for them. I would advise them to buy into unit trusts (mutual funds) that invest in Asia and Emerging markets, based on dollar cost average basis. Do not throw all your money in, fresh bad news from US can affect the overall market sentiment.

My humble websites:
http://basemetal-trading.blogspot.com/
http://investment-news-update.blogspot.com/
http://allaboutoil.blogspot.com/

 

[123]

Hedge funds increase long position on oil

Hedge funds had increased long position on oil, those who hope that oil price is going to come down are going to be disappointed.

Hedge-fund managers and other large speculators increased their net-long position in New York crude-oil futures in the week ended May 13, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 71,767 contracts on the New York Mercantile Exchange, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 8,549 contracts, or 14 percent, from a week earlier.

My humble websites:
http://basemetal-trading.blogspot.com/
http://investment-news-update.blogspot.com/
http://allaboutoil.blogspot.com/

 

[123]

Everyone should have some gold investment in their portfolio

USD had been appreciating last week on anticipation that subprime issue in US is over, they must be living in fairy tale. Some "experts" are predicting that this is the start of USD strengthening, and we will not see EUR/USD at 1.60 again. This senseless anticipation is pushing gold price down, giving serious investors a chance to buy gold at attractive level.

China still wants to be a global player. In order to come up to speed with the rest of the central banking world, it is estimated China needs to purchase 2,000 to 3,000 tons of gold.

China’s sovereign wealth fund has over $1 trillion to invest, and it has been stockpiling commodities - including gold - all the while the Chinese and Indian middle classes have been accumulating gold like mad.

Deep problems are developing in the U.S. credit markets. The housing industry is crashing while debt problems are infecting the general economy. Consumer demand is beginning to suffer. Consequently, the U.S. is entering a recession that may well last longer and run deeper than most think. The average citizen is being hoodwinked about the seriousness of these problems by media sound bites while the purchasing power of their dollars dwindles. However, knowledgeable investors are not so easily distracted, and gold is becoming more enticing as a financial safe haven and inflation hedge.

One thing you can count on is that as long as the Fed continues to push interest rates below the true rate of inflation and balloons the money supply, gold will be attractive as an inflation hedge. While demand for precious metals is increasing on a global scale, supply is being severely curtailed due to played-out reserves and South African production being shut down for a lack of power. South African mines will not be up to full production again for several more years, and they account for a full 20% of the world’s gold supply.

At the root of it all - underlining gold’s continued advance to $1,600 is the declining value of the U.S. dollar. As the U.S. dollar falls, gold will rise.

The Fed’s response to the recession is providing the fuel for the commodity bull market, as well as the inflation that goes along with it. As long as the Fed holds interest rates below the true rate of inflation, inflation will continue to rise and the dollar will continue to fall. This will encourage foreign governments like China , Iran , etc. to shun U.S. dollars. The dollar weakens, gold rises, and the cycle goes on.

My humble websites:
http://basemetal-trading.blogspot.com/
http://investment-news-update.blogspot.com/
http://allaboutoil.blogspot.com/

 

[123]

Making a CFA count

Firstly, what it won't do: it won't open a door to a job. But it will indicate that you're of the right caliber.

Peter Douglas, founder of GFIA, a hedge fund research firm, says the CFA is a very high quality program which signifies your interest in the industry: “My perception is that, while it won't make you a better analyst or fund manager, it's a very useful indicator to an employer, because it says you were prepared to give up three years of your social life to study to gain entry to the industry.”

At Standard Chartered Bank, staff who are directly involved in the business of financing, banking and accounting are encouraged to attain the CFA. While “not a must” for most support functions, having a CFA does provide an individual with more career mobility within the bank, according to David Lim, Stanchart Singapore’s head of human resources.

“In fact, it is an essential ingredient for staff in certain functions of the bank, for example, corporate finance,” Lim says.

Tim Hird, managing director of Robert Half International, Singapore, says the CFA can be a better indicator of aptitude than a Masters in Applied Finance (MAF) or a Masters in Financial Engineering (MFE) – the credibility of the latter two programs depends more on the institution that disburses them.

My humble websites:
http://basemetal-trading.blogspot.com/
http://investment-news-update.blogspot.com/
http://allaboutoil.blogspot.com/

 

[123]

The Lord is watching over us

As an eagle stirs up its nest, hovers over its young, spreading out its wings, . . . so the Lord alone led [Jacob]. —Deuteronomy 32:11-12

For 3 months I had a ringside seat— or should I say a bird’s-eye view— of God’s amazing handiwork. Ninety feet above the floor of Norfolk Botanical Garden, workers installed a webcam focused on the nest of a family of bald eagles, and online viewers were allowed to watch.

When the eggs hatched, Mama and Papa Eagle were attentive to their offspring, taking turns hunting for food and guarding the nest. But one day when the eaglets still looked like fuzzballs with beaks, both parents disappeared. I worried that harm had come to them.

My concern was unfounded. The webcam operator enlarged the camera angle, and there was Mama Eagle perched on a nearby branch.

As I pondered this “reframed” picture, I thought of times when I have feared that God had abandoned me. The view in the forest heights of Virginia reminded me that my vision is limited. I see only a small part of the entire scene.

Moses used eagle imagery to describe God. As eagles carry their young, God carries His people (Deut. 32:11-12). Despite how it may seem, the Lord “is not far from each one of us” (Acts 17:27). This is true even when we feel abandoned.

— Julie Ackerman Link

Under His wings I am safely abiding;
Though the night deepens and tempests are wild,
Still I can trust Him—I know He will keep me;
He has redeemed me and I am His child. —Cushing

Because the Lord is watching over us, we don’t have to fear the dangers around us.

 

[123]

How do I pick stocks?

First I'll do a business analysis on the companies:

Company A sold 100 million units of product A at $1. Then the next year, company A sold 120 million units of product A at $1.20 (sold more products at higher price).
Company B sold 100 million units of product B at $1. Then the next year, company B sold 120 million units of product B at $0.80 (sold more products at discounted price).
Which is a better company?

Looking from a profitability perceptive, Company A is a better company. Despite rising the price of its goods, it is still able to sell more of its product, and resulted in expansion of its profit margin.

As for company B, it tries to sell more of its products by lower down the price of its product (giving discount), thereby attracting more customers to buy its products. There is nothing fantastic about its business and management. Does this company sounds like some of the shopping malls? Some shopping malls are only crowded with people when there is sales going on, when it has no sales, the crowd is so much lesser.

So what kind of business or industry will consumers willing to pay a higher price and possibly buying more at the same time?

1. Iron ore & copper suppliers (CVRD, Rio Tinto, BHP Billiton, Freeport Mcmoran, Southern Copper)
Iron ore and copper supplies are monopolised by a few huge miner companies. So steel makers do not have much choice but end paying a higher price for the iron ore year after year.

2. Strong branding retailers (Apple)
MP3 from Apple costs $200 - $300 plus, somehow consumers are still willing to pay for this kind of price.

3. Oil rig contractors and oil services companies (Diamond Offshore, Transocean, Swiber Holdings, Schlumberger)
As price of oil rises, demand for oil rigs increase as well. Oil rig contractors rise the rental of oil rigs to about USD500,000 a day now, still there are demand.

4. Toll road companies (Anhui Expressway, listed in Hong Kong)
If you need to drive from point A to point B, and the road that leads to point B is an expressway, you still have to go through this road even though price of toll fees increase.

5. Healthcare (United Healthcare)
High price of healthcare services do not reduce the number of patients.

6. Niche industrial companies (Tai Sin, C&G Industrial, Foreland Fabrics, Armstrong Industrial, Yip's Chemical, Garmin Ltd and Google)
Some industrial companies have niche technology or competitive advantage, that enables them to command a higher premium for their goods and services.

After identifying the industry or companies that I'm interested in, then I'll do a financial analysis, reviewing their cashflows, debt level and valuation. I do not want to overpay a stock even though the company looks very solid.

If all looks ok, I'll invest some first, and buy more if fundamental continues to look strong.

My humble websites:
http://basemetal-trading.blogspot.com/
http://investment-news-update.blogspot.com/
http://allaboutoil.blogspot.com/

 

[123]

A Personal Gospel

Go into all the world and preach the gospel to every creature. —Mark 16:15

In John 3:16 we read, "For God so loved the world." But what about His love for individuals? The rest of the verse reveals the central purpose behind God's sacrifice of His Son: "That whoever believes in Him should not perish but have everlasting life." Therefore, without exception, every person may interpret John 3:16 like this: "For God so loved me!"

A. B. Simpson, a great missionary of the past, often hugged a globe to his chest and wept over the world's lostness. Yet his global vision was marked by compassion for individuals. You and I also must feel the responsibility to take the gospel to our world—by sharing the good news with one person at a time.

Unfortunately, we often think of the Great Commission in terms of "foreign missions" only. "World missions" is perhaps a better term, for that includes our nearest neighbors, who are part of the world to which God has called us. And we are already there!

Like A. B. Simpson, embrace your smaller world through earnest prayer as you consider lost individuals in your family, neighborhood, and workplace. Then, as you seek to live and give the good news, expect God to open doors of opportunity. — Joanie Yoder

Jesus died to bring salvation
For the rich and for the poor;
Those of every tribe and nation—
He includes the ones next door. —Anon.

The light that shines farthest, shines brightest at home.

 

[123]

Alternative way of trading forex, indicies and commodities

I assume most of us here are sophisticated traders, savvy and have big appetite, or else you would not have been attracted to this website. I would assume that some of you already have experience in leverage trading, either in forex or futures products (stock indicies or commodities).

In my previous job, I have the priviledge of being a futures broker. Maybe you would ask, is there any priviledge in being a future broker? Of course yes!

Being a futures broker, I can observe the trading style of a very broad group of traders. They come from various backgrounds: either retail or institutional, scalpers or position takers, high net worth individuals or small players, from China, Indonesia, Malaysia or Singapore. By observing their trading style, I can learn from their past mistakes.

I had seen scalpers winning small profit when their view is correct, and lose big time when their view is wrong. End of the day, their profits are not even enough to cover their losses.

I have seen position takers winning a lot of money in their open positions, suddenly their profits turn into losses due to an unexpected event (maybe sudden raise in interest rate or sudden implementation of government policies). Eventually suffers the fate which no trader ever want: margin call.

Many times, my readers had sent emails to me, asking me to introduce a low commission broker. Actually there is already an alternative way of trading, and it comes with zero commission. That is binary trading.


Binary trading:

Binary trading allows you to bet on discrete financial events that have only three mutually exclusive outcomes; Win, Loss or Draw.

Prices on such financial events are quoted in various Odds and are quoted during market trading hours of that financial instrument ("in-running").
You do not need to wait on the outcome of the financial event and can "close out" to take an early profit or cut loss if the events are going against the bet.

Using a real-life example (time is 18.26pm China time, date is 18 Apr 08):

At that time, spot price of AUD/USD is 0.9364. The binary odds for AUD/USD Daily bet, strike price 0.9373, odd for "over" is 0.43 and odd for "under" is 0.65.

Translate the above statement into simple english:
If you think AUD/USD will close at over 0.9373 by 5am (21:00 GMT), your binary odd is 0.43.
If you think AUD/USD will close below 0.9373 by 5am (21:00 GMT), your binary odd is 0.65.
Say you are placing a bet of US$100, a binary odd of 0.43 means that if you lose, you lose US$43 or 43% loss; When you win, you gain US$57 or 57% gain.
Compared to margin trading, to achieve a gain of 57% is so much tougher, and the risk level is so much higher.

In the above trade, you will know what is your maximum loss if your view is wrong, and what is your gain if your view is right. What's more, there is never any commission to pay: any profits you make are yours to keep in full.

Hence looking from a risk-management perspective, binary trading looks more favourable compared to conventional trading.


Events driven trading:

Every other day, there is at least one US economic data. And some of these data can move the market wildly. Some of the impactful data includes: Non-farm pay roll, FOMC interest rate decision, Jobless Claims, CPI, PPI, etc.

Say Non-farm payroll data is going to be announced at 11pm. A positive data may push USD higher, and a negative data will resulting in weaker USD. If you are negative on the data, you can place a hourly bet on the "over" trade. So if the data is indeed a bad data, EUR/USD is expected to rise higher, resulting your "over" trade to make money.


Discipline trading
Say your initial capital for today is USD300. Set yourself a target how much return you would like to achieve, say 50%. Place your bet on the 5 min game. Stop your betting once you gain 50% profit of your capital.


Other benefits:

a.Low capital outlay.
Unlike futures trading whereby a huge capital is required. You can place a bet for an amount as small as USD10.
b.Traders do not have to worry about margin call.
c.No interest charge.
d.Downside risk is capped, unlike leverage trading where you can lose more than you can afford.

I had written so much on binary trading, but I had barely touch the surface on binary trade. I will touch more on this topic in the near future.