Here is small part from my letter
Dear Members,
Most of metals members started following our work from 2001. It was easy time for investors or traders to trade markets but since oil bubble embarked on 2004, volatility became a central characteristic of financial markets. Huge short-term and intermediate term fluctuations started to take place frequently in commodities, currencies and stock markets. Among all financial instruments, commodity market behaved most erratically. Who can forget oil’s move from $145 to $32, wheat from $1,475 to $450, corn $800 to $330 and then sugar’s round trip from $12 to $30 and then dropped all the way back to $14. These enormous short-term moves irrespective of long-term underlying fundamentals showed clearly that the big boys or speculators were able to gang up together to create either a bull or bear at their will.
They are trading in simple fashion: if there are more traders shorting the markets then take that market up until shorts get slaughtered. That is most of what we see now in short term as well as intermediate term trading. Longer term trading has now fallen out of fashion because of these short term huge volatility. For example, corn, dollar and stocks are entering longer term bull markets but short term volatility is scaring away longer term investors.
Many will ask that what we shall do in this kind of markets where rapid-fire trading dominates volumes, prices, news and psychology on a daily basis. What should be our strategy for short, intermediate and longer term investments?
There was a time when I was totally against short term investments, but lately in last few years market conditions or trading pattern has proven that one can have small portion of investment in short term trading to take advantage of these volatilities. However, still, investors should have a longer term focus and the long-term trend bets are what give us huge returns.
We’re all aware that compared to bond, stocks and currencies, the commodities market is very small and many commodities trades with very less volume which is not feasible for large institutional investors to get involved. Sugar, cotton, lumber, orange juice, cocoa, palladium, platinum, copper, and silver can be pulled up or down sharply by a few fund managers because these markets have thin trading volumes. A few years back we saw how grains, natural gas and oil traded. Natural gas was a typical example which shows how a few speculators or hedgers were able to control the market. If you want to learn something new in market please watch natural gas movement and I am sure it will teach you lot in next few weeks.
Let’s come back to strategies which we can implements in current market situation. As you know that longer term we are recommending alternative energy stocks, dollar index, all major stock markets, silver, corn and coffee. Yes, gold, oil and base metals are not in my favorite list but still gold will perform better than base metals and oil. We suggest that you invest at least 15% of your portfolio in above mentioned areas. Any sharp move on the down side then you should add 10% each time such correction happens.....
Medium term