Commodity Trading & Trend Following

The bastion of safety that Muni bonds held in the past might not be that safe any more. All one has to do is use a little common sense. In this economy sales tax, income tax and property tax revenues are declining. The question is can we expect more defaults like Harrisburg, Vallejo or Central Falls Rhode Island. On average $1 billion of munis default a year. This year however according to Richard Lehmann’s Distressed Debt Securities statements we are at $1.7 billion.
Countless hospitals, nursing homes, toll roads, stadiums, small parking projects and school districts that are struggling to make their coupon payments. School districts were convinced by their advisors to enter into toxic interest rate swaps or high risk investments that they did not fully understand.

Pundits still claim Munis are safe if you buy large, essential service revenue and General Obligation municipal bonds. However if there is an onslaught of defaults on the the weak issuers which no longer pay…this will stain the market and a possible domino effect can take place.

Big name cities and States are struggling such as Los Angeles, San Diego, Illinois and even New Jersey. Considering this fact how comfortable can you be investing in this strategy. Many times the perceived low risk ideas ( such as Muni bonds) are more risky than thought of supposed riskier asset classes such as commodity trading.

Yes there is risk in commodity trading and managed futures. I do not want to belittle the risk however the risk can be addressed with a proper trading plan of thinking of terms of risk per trade…risk per sector..and total portfolio risk. To the contrary this is impossible with muni bonds that you can get wrapped up in events that you have no control over as well as the liquidity comes into question.

In my opinion trading a well thought out plan with the utmost of risk management in place trading commodities in a trend following manner gives one the potential to compound money over time. This is not a get rich quick nor anything easy. In reality most of the time it can be very aggravating …nothing happens…small profits..small losses…whipsaws and then when you least expect it…you have a nice profitable period followed again by the above. If you can rise above the aggravation and not let it effect you….you stand the potential to compound your way to wealth through trend following a large basket of commodities.

Follow the trend …have a plan… manage the risk… have discipline and patience to let the plan work out over time

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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All are seeking safety in these times of uncertainty. The question rises did Crude oil become a safe haven? According to reports supplies are at record highs and some analysts suggested crude should fall to 10-20 dollars a barrel. Hearing things like this simply reinforce my belief that with trend following a basket of commodities you do not need to know or predict anything. If crude really does fall to these levels trend followers like myself should make a fortune like in the past. Having no opinion I rode up the price of crude and then sold when it fell out of bed. Compare this to traders that analyzed and knew where the market was supposedly going ( Amarnath). Amarnath blew up and lost a tremendous amount of money.

I have learned a long time ago…there are no experts or gurus…My guru is price action. I react to price action.

If the masses think Gold has become a currency and it rises as a bastion of safety I will ( I already have) purchase gold. If gold crashes…I will sell gold without any thought. This is what makes a successful trend follower. Trade without any opinion. The fact is no matter how diligent ones research can be…price action takes this out.

Follow the trend …have a plan… manage the risk… have discipline and patience to let the plan work out over time

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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Gurus come and gurus go. What is interesting is Charles Nenner most people have never heard of him. He started Charles Nenner Research Center in 2001. Prior to this he spent years as a senior technical analyst for Goldman Sachs as well as head of trading research at Rabobank International.

Charles Nenner recent forecasts include:

In March 2009, when many thought the next Great Depression was approaching Nenner said the S&P 500 was going from 660 to over 1000.
Nenner was also correct with gold’s 6 month run from June in the low 900s to 1220.

This video was in July 15th 2010…It is a great watch.

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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Paul Krugman the Nobel-prize winning economist and writer for the NY times thinks we need another Stimulus. Further more he believes the money should be spent on infrastructure. I am not a noble prize economist nor a writer for the NY times but if the first stimulus just put our grand children in debt what makes anyone think another stimulus will solve our economic problems. It would seem to a layman trend follower this could make matters even worse.

According to Krugman, the bond market, which has soared to record heights, is in effect saying there’s no need to worry about deficits. Personally I hate deficits and owing anyone money. This trend in the bond market has been profitable for trend followers but leaves many to think there is a bond bubble brewing. What happens if our lenders decided they are growing weary of lending to a risky client ( the US Fed). Scary thought…the outcome could be massive inflation…high interest rates…etc..

These outcomes would hurt the average citizen…however this could be a major boon to the those who are trend followers. We are in such an unknown financial circle currently. However what is known and proven in times of crisis trend following and managed futures stand the potential to shine. The key is potential, there are no sure things and past performance is not indicative of future performance but I remember the bond crisis in 1994…the gulf war…as well as the more recent 2008 stock market and trend following held up and protected capital while others were decimated.

I can not see spending our way out of crisis makes any cents…just more debt for our great great grandchildren.

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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Below are a list in descending order of ( maybe) safest banks in the world.

1.Shizuoka Bank Japan
2. Nat’l Bank of Kuwait
3. Intesa Sanpaolo Italy
4. Pohjola Bank Finland
5. BNY Mellon US ( Thank God)
6. Nordea Bank Sweeden
7.DBS Bank Singapore
8.HSBC Holdings UK
9. ASB Bank New Zealand
10. Banco Santander Spain (???)
11.National Australia Bank
12. Royal Bank of Canada
13.Landwirtschaftliche Rentenbank Germany
14. Zuercher Kantonalbank Switzerland
15. Bank Nederlandse Gemeenten Netherlands
16. Caisse des Dépôts et Consignations France ( safest bank in the world)

via CNBC …

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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In these days it is hard to find confidence or trust in anything. As a long term trend follower the only thing I trust is price ( as well as my Golden Retriever, wife and kids). If I tried to trust anything other than price I would surely lose money. The reality is everything known is reflected in the price. Price encompasses the battle between the bulls and bears in any market. The next reality is no one has a crystal ball or knows where any market is going. When I trade as a trend follower I am on the same level playing field as the largest Commodity trading advisor or hedge fund. They do not know anything more than I.

Contrary to what my wife would say to people..I actually know nothing about any market. I have no idea..I might have opinions but I know if I trade my opinions that can be dangerous to my trading record. It is pretty funny people think you are smart when you stumble into a winning trade. I have many a time told people at some social gathering or other…I have no idea why this happened or that happened to the chagrin of my wife ( When I am supposedly to be knowledgeable or know the future).

I trade all markets exactly the same. Again I have no knowledge of corn,silver,coffee or anything about the forex markets. Markets have made me humble and never predict. I have seen too much CNBC and Bloomberg with all the predictions. Funnier I have seen traders with a different system for each market or even different forex markets.

Bottom line …Everything is represented in price. Trust price ( trust your Golden Retriever and family)..Have a thought out trading plan or investment strategy. Expect draw downs and embrace them as a chance to increase your exposure to trend following in commodity trading.

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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If you listen to David Rosenberg a famed economist he makes points that are very clear. Not to be negative but the facts speak for themselves.

1.GDP projections for 2010 to the 1.5 to 2 percent range
2. Unemployment is unabated
3.Chicago Federal Reserve President Charles Evans has publicly stated that government programs to help distressed homeowners have been ineffective and aren’t helping the pivotal housing sector recover.
4. National Association of Realtors stated last week housing is at a 15 year low

How much stimulus money needs to be injected? How much of it will work or better said wasted!

The fact in the Great Depression there were similar rallies in the stock market and many thought the worst was over. The fact was the stock market ending falling almost 90% and took 25 years to recover. Too many people do not understand that Japan the virtual leader of the world in the 1980s is still in dire straits. The stock market of Japan was at 39,000 today approx 9,000. Let alone the real estate market is similar in direction.

What do you do? How can you protect yourself? Solution is trend follow with a well thought out plan that includes a proven methodology that includes a risk per trade…risk per sector…and total risk on the portfolio….with simple entries and exits. If this is too much for you…allocate to commodity trading advisors that understand risk and have the discipline & patience to follow them long term.

Be a long term investor in trend following not blindly buy and hold ( pray) in just the stock market.

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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In all reality how can you spend your way out of crisis.. Can you imagine telling your wife we do not have any money…and go and spend more…and btw you will just print up some money to take care of her spending. It is a ridiculous thought but that is what politicians are doing. You can not spend your way out of a crisis. Savings are in order! In our household I am “trying” to explain the difference between want and need. This is what our country needs and is lacking.

The background with this reality makes me as well as probably you very concerned about our future. The fact is we have alot to be concerned. However with that said, I have a solution!

Think logically the world is not going to end. People will always need to eat however some currencies including the US dollar might have severe issues in the future. My solution is real assets. The only solution for this is trading a basket of commodities,interest rates, currencies, bonds, energies, stock markets and metals with a well thought out plan. My plan is trend following. This plan has worked since Joseph in the Bible with a bull market in wheat. The fact is there are other methodologies for trading but they must match your personality. My personality takes a very long term compound my way to wealth with trend following stance.

I look to buy the strongest and sell the weakest… in my mind this is very logical however many pundits do not agree with the idea of buying high with the hope or potential this high will go higher….or vice versa.. selling low…with the chance low will go lower. This is counter intuitive to most people. They want a bargain, a deal or something to brag about how smart they were that they bought something at the bottom. I want to be the idiot that overpays and I fall ( rarely) into a major trend . One example is the interest rates. Who would have really thought interest rates would go this low…or how about the Nasdaq be down? Not me…I have learned not to predict…but react…have no opinion…

With the USA Biggest Debtor nation in the history of the world I like having the ability to buy and sell real assets. Trend Following is the only strategy that makes sense. Liquidity and transparency are key elements. I am not smart enough ( nor is really anyone) to know the direction of any market. I let price direct me with a well thought out plan with full discipline and patience to let it work with the models I am trading.

Andrew Abraham
Andrabr9@gmail.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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It always shocks me that so called investors run for the doors when a commodity trading advisor has a draw down. The fact is as much as they are not palatable for investors to go through they are as normal as breathing out. I look at draw downs of successful long term commodity trading advisors as an entry point almost like buying a stock at a discount.

A good example of a trend following commodity trading advisor who has been around since 1988 and was an original turtle is Jerry Parker of Chesapeake Capital Corporation. He has a compounded annual rate of return close to 13%. Compare this with the stock market over the last 10 years yet you have investors seeking ideas just on stocks while Jerry Parker looks for trends in various asset classes in over 90 markets. Instead of taking advantage of this years 17% draw down investors withdrew their funds from Chesapeake Capital Corporation. This is so totally ridiculous and flawed. Chesapeake Capital Corporation has gone from almost $2 Billion dollars to $600 million. Has anything structurally changed with Chesapeake Capital Corporation??? Probably not…as I stated… draw downs as uncomfortable as they are ….are as expected as breathing out.

If you want to attempt to compound your way to wealth… There are various ways..one of them is allocating no more than 2-5% of your net worth to proven trend following commodity trading advisors. This is what I do …as well as I trade my own programs as well as a program with my partners in which we too strive to develop a track record.

After all my years of investing..no other strategy offers liquidity…transparency as managed futures. You can liquidate your entire portfolio ( granted there are no limit locked markets you are invested in) within minutes.. Try doing this with real estate….

Have a plan…Know exactly where to buy…where to sell and mostly how much…Diversify..Diversify…and watch your leverage.

Andrew Abraham
A.Abraham@AngusJackson.com
www.Angusjackson.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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After Fridays ( relief) rally is it safe to come out and play or invest? Probably not, As a trend follower the trend is still down on the SP 500. Even with Friday’s nice rally, the index is still below the 50 day moving average as well as most importantly 200 moving average.

Nothing has changed….plunging home sales, a non relenting weak employment market and the quarterly rate of economic growth is at 1.6 percent. Contrary to Bernanke’s speech the question arises has the FED ran out of miracle economic bullets? Time will tell and I surely do not predict but rather react. There are lower highs on the stock index charts and days like Friday are to be expected as a trend follower. It is not fun to see profits given up as in the bonds….but trend following takes a strong stomach and the utmost of discipline and patience.

The reality is most investors want the quick profit and be told what to do. This is not what successful trend following is in the commodity or forex markets. Have a plan…follow it…

Diversify between possibly your own trading…or between groups of commodity trading advisors to attempt to compound your way to wealth. It is surely not easy but with a plan…discipline…and patience it can be achieved.

Andrew Abraham
A.Abraham@AngusJackson.com
www.Angusjackson.com
www.myinvestorsplace.com
Futures trading involves risk. People can and do lose money

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