Michael Covel: News & Info.

In the last 24 hours I posted an article that mentioned a book titled Taming the Lion by Richard Farleigh. I have not had a chance to read the book yet, but found the article interesting. I also noticed that since the book was mentioned here it has gone from #200,000 on Amazon’s sales rank of all books to #954. Richard you owe me lunch!

Ed Seykota’s first publicly available book is here for purchase. The book is only available at this time directly from Seykota’s offices.

An interesting article by Tom Stevenson from The Daily Telegraph:

“You’ve probably heard the market adage ‘the trend is your friend’. It’s been around so long and sounds so corny that, if you’re anything like me, you’ve not given it much deeper thought. That’s a pity because it is more profound than it sounds. This realisation hit me in a senior moment at the weekend while reading an excellent investment book, Taming the Lion by Richard Farleigh (published by Harriman House). Farleigh deserves a moment of your time because, despite an unpromising start to life (his early years were spent in the back of a pick-up truck driving round Australia with his itinerant, alcoholic father), he had made enough money by the age of 34 to retire to Monaco.”

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From the wires:

“Remember all those predictions last winter that the greenback was certain to be crushed in 2005 under massive U.S. trade deficits? Oops! The dollar has levitated about 15% against both the euro and the yen this year, though the fearsome deficits turned out even bigger than expected. On Nov. 16 the dollar reached a 27-month high against the yen and a 24-month high against the euro. Dollar bear Warren Buffett said on Nov. 4 that his firm, Berkshire Hathaway (BRK), had lost about $900 million through September on currency bets.”

I am curious why the major press was not curious about what technqiue Buffett used to take his initial short position in the Dollar? He built his reputation off going “long only” or off “buying and holding”. Shorting the dollar seems quite different than those strategies. Lastly, what prompted the exit of a substantial part of that short position in recent months? I am curious.

Trading is a zero sum game. It takes ‘losers’ to give ‘winners’ their profits. For example from Yahoo! Finance:

“China stands to lose at least 100 million US dollars on the London Metal Exchange after a bet by a state commodities trader went spectacularly wrong, a press report says. Citing a source close to China’s State Reserve Bureau (SRB), the South China Morning Post reported that SRB copper futures trader Liu Qibing took short positions equal to about 130,000 metric tonnes of copper in July and August. At the time, Liu paid about 3,300 dollars a tonne, expecting the price of copper to decline. Copper prices for delivery in three months’ time are now about 4,119 dollars a tonne, the paper said. “Liu disappeared from the market in early October and that week the bureau recovered about 50,000 tonnes of short positions on the London Metal Exchange, which pushed prices up to about 3,800 dollars a tonne,” the source said. “He has been singled out by the bureau as a scapegoat, but he was only acting according to bureau regulations and procedures.”

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Jake Carriker manages money for clients. He is a trader. He forwarded me an exchange he had recently with someone who had sent him an email. This individual wanted to know Jake’s “opinion” on the stock CNC. Jake’s response:

“First, the tiresome explanation of my logic, then the bottom line. Much of my analysis of securities prices is based on rather blunt, possibly inappropriate, application of some principles from Newtonian physics to the markets. Objects (and if you buy what I am selling, stocks) in motion tend to stay in motion until they encounter an opposing force of sufficient magnitude to slow or reverse the current momentum. Keep in mind that much of the time there is an absence of momentum and stocks just kind of drift aimlessly sideways until some force kicks them off high-center. That’s the “objects at rest” part of that little ditty.”

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The great traders trade everything. This white paper from the Center for International Securities and Derivatives Markets is good reading. Also, this brochure from the hedge fund Superfund adds more to the topic.

View full Complex Chinese book jacket here.

A great quote from Carl Safina:

“An observant person sees things overlooked by others. A scientist sees things going on and then asks how these goings-on array themselves into patterns, patterns that are reliable and predictable. A really good scientist–or a really good artist for that matter, anyone whose mind and soul are capable of some extension–sees what is going on, sees the patterns, and asks, ‘Why?’ What underlying forces are at work? How are those forces exerting themselves? How may we understand? Once pried from the universe by a great mind or a discerning heart, the hard-won understanding may then be conveyed and conferred upon humanity at large. A painting is nothing more than light reflected from the surface of a pigment-covered canvas. But a great painter can make you see the depth, make you feel the underlying emotion, make you sense the larger world. That, too, is the power of science: to sense and convey the depth and dimensionality of nature, to glance at the surface and to divine the shape of the universe around us.”

From Yahoo! Finance:

“With oil prices well below $60 per barrel for the first time in months, inflation and fourth-quarter retail sales remain Wall Street’s major preoccupations. High inflation means the Federal Reserve will continue raising interest rates which, while keeping prices in check, makes economic expansion far more difficult. But if the Labor Department’s latest pricing data shows modest inflation, that means consumer prices will remain low. And while the consumer is certainly bound to wrestle with high energy prices this winter, there’s a chance people will spend enough money this holiday season to keep the economy growing briskly. A lot of things have to come together for Wall Street to enjoy its traditional end-of-year Santa Claus rally: low inflation, lower energy prices, strong retail sales and bullish earnings forecasts from major companies.”

With this reporting, how do you know when to enter and or exit?