Thursday, August 21, 2008

Long the U.S. Oil Fund - USO

I had mentioned that I would be getting long crude via the USO if USO could take out the $95 level. Well this morning it blew thru it gapping up and opening at $96.83 which is where I was filled on 1 unit long. I realise many out there find the concept of buying something which has gapped up and vice versa, shorting something which has gapped down petrifying. Remember the hard trade is more often than not the right trade. Which makes it stand to reason that often the easy looking trade is the trap, think Fannie and Freddie, which I will get shortly.

The thing you must acknowledge is that gaps are extremely powerful signals. I realise that this is the summer and some traders are away from their desks but they all have crackberrries and have their minions of underlings manning their post, so I do not put much credence in the "nobody's around" mantra.

I am now long 1 unit of USO at $96.85 with a stop at $91.38

I want to touch on the Fannie and Freddie talk that has been going on the last few days. I really get a kick out the so called capitalists on financial TV, screaming how they, Fannie and Freddie, cannot be allowed to fail. These are the same eternal optimists who believe everything, everywhere at all times is bullish now cry Armageddon if Fannie and Freddie are allowed to fail. I can assure you the failure of these 2 misfits, and that is being kind, would no doubt be painful, but we will most surely survive.

The longer we put off the day of reckoning the worse it will be. The big problem here is lots of purportedly brilliant, connected and influential heavyweights in the capital markets are up to their eyeballs in Fannie and Freddie paper, be it equity, subordinated or superior paper. And to a tee they are all scared to death of a default. They were smug as could be pontificating and waxing both public and private at their brilliance, the proverbial "no-brainer" trade they had put on with the implied government guarantee.

Ahhh the markets, tis why I just love it. They mete out their punishment not based on upbringing or background but rather on an unbiased, non partisan, truly impartial manner. The market cares not if you went to Harvard or Yale, cares not if Daddy bailed you out of every mess you've ever been in. Ya just gotta love it.

Good speculating to you all and never ever forget that "an investor is a speculator who made a mistake and will not admit it".

Open Positions:
Long 2 units of Powershare Agriculture ticker DBA @ $35.35 stop $34.79
Long 2 units of XTO Energy ticker XTO @ $45.40 stop at $44.48
Long 1 unit Currencyshare SwissFranc ticker FXF @ $92.70 stop at $90.68
Long 1 unit Ultra Oil & Gas Proshares ticker DIG @ $84.35 stop at $79.68
Long 1 unit U.S. Oil Fund ticker USO @ $96.95 stop at $91.38
Short 1 unit Int'l Bus Machines ticker IBM @ $129.05 stop at $128.56
Short 3 units FedEx ticker FDX @ $87.10 stop at $88.16
Short 2 units of Apple ticker AAPL @ $178.05 stop at $182.76
Short 1 unit Blackrock ticker BLK @ $218.50 stop at $218.126

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