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NW: I think the best bet for a post Y2K scenario is to short Crude Oil. At
more than $25, Crude has doubled in price in the past 10 months. The oil
companies are making mucho dinero at these prices. Even marginal wells are
profitable here. Having said that, many users have had to stockpile crude and
other oil products as a hedge against a Y2K crisis. Most bought at prices
between $20 - $27, certainly not cheap. There were also those hedging against
a cold winter, stockpiling heating oil. The Y2k hedges were totally
mandatory, so they had to pay whatever the price was. Some of the weather
related hedges are somewhat discretionary. Data came out today indicating
that maybe this is not gonna be such a cold winter. This is just as I
expected, ala La Nina. Now imagine what could happen after Jan. 1 when there
is no crisis and the weather stays warmer than normal ala La Nina? ! All
those hedges will have to be unwound! Oh My!
After Jan. 1, I can see the possibility of Crude Oil "sliding" $5 in one
week. That works out to about 500% on the required margin. On the flip side,
it is highly unlucky that Crude Oil will take out its recent 27.10 high by
any significant amount. Now ask yourself, what would the stock market have to
do for you to make 500% on required margin if you were trading S&Ps? I am
not recommending trading on such high leverage. In fact, I try to average the
reciprocal, $5 of equity for each margin dollar. But, you can see why the
stock market doesn't get me excited. The risk - reward is much better in
commodities.
MY HEDGE: The above is not intended as trading information or any
trading recommendation, but merely to stimulate thought and discussion.
Hedgingly,
Norman
Jpilleafe@xxxxxxx wrote:
> In a message dated 12/22/99 2:01:26 PM Pacific Standard Time,
> hehohop@xxxxxxxxxxx writes:
>
> << I beleive that the high level of bullishness, discounting of the y2k
> non-event, and the January Effect migration to Nov/Dec is a setup for a
> down January in the stock markets.
> >>
> All good points,...consider too the likelihood of
> tax selling in NASDAQ issues being deferred into
> next year,...can postpone a tax bill for another
> year if sale is delayed into year 2000,...etc.
> Players with huge gains want to defer those
> gains into next year's tax bill. Question is will
> tax selling to lock in gains more than offset
> sidelines cash looking to re-enter the market
> assuming Y2K is a non-event. My guess is yes,
> ..as the gains in Nasdaq are so huge,...the
> sentiment so complacent,..and at some point
> the pressure from rising interest rates likely to
> become real,...that it is difficult to see how a
> new uptrend could develop from these levels.
>
> The most constructive thing in my mind that
> could happen at some point in time in the First
> Quarter of 2000 we get very washed out,.....
> then the possibility for a sustained advance
> would be much greater.
>
> Regards,....JIM Pilliod jpilleafe@xxxxxxx
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