Looks like we picked the wrong week to short FCX!
Copper hit a new all-time high in Shanghai this morning (as the guy who owns 90% of London’s closed for the holiday exchange supplies sold it to himself for more money than he did yesterday) and gold is back at $1,400 in the futures and that should give us a better entry on FCX puts than we expected for round 2 but Paul Krugman has me worried now that maybe commodity prices are just high because the World hasn’t got enough of them to go around. Usually Paul and I agree but i think he may be discounting the effect of a 10% decline in the dollar a little too much – which is understandable as he is still arguing for more stimulus while I’m arguing that the way they are stimulating now is causing this problem and can not and should not be sustained.
Still, we have to be pragmatic. That’s why, this weekend, I posted our “Secret Santa Inflation Hedges for 2011” as a follow-on to the “Breakout Defense – 5,000% in 5 Trades or Less” ideas of the 11th and, in the week between the two, we had bullish bets on HMY, XLF, CAKE, TNA, IWM, CCJ, CHK, EXC, TNA, XLF, UNG, GLD, AAPL, GLW, TOT and AXP – which I had mentioned on the 19th in the weekend post “It’s Never too Early to Predict the Future.” Just because I think there’s going to be a disaster doesn’t mean we can’t go with the flow while we wait, right?
We don’t have to like the market to buy it above our breakout lines but we do need to keep in mind that this is a very thin rally that is very likely nothing but window dressing aimed at dragging money off the sidelines so the IBanks who have been propping up the markets can, once again, stick the retail shareholders with the bag as they load up on puts (watch the VIX to confirm) and crash the markets once again. I’ve seen it happen in 1999, I saw it happen in 2008 and, both times, the rally lasted longer than seemed logical but the smart play was to hit and run – not to leave your money on the table but to participate in the upswings and then…
