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Stock Ideas Investors Daily Edge Hot Commodities Are Hard Work
Stock Ideas Investors Daily Edge Hot Commodities Are Hard Work 
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The "New" Exxon Mobile is up 83%... and counting! T. Boone Pickens is a major oil guy. He became successful buying up oil and gas companies and trading energy for his fund, BP Capital. And now he’s forecasting $150 oil. Not only is he forecasting higher and higher prices for black gold, but he’s also putting money into new oil companies. |
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| Hot Commodities Are Hard Work |
| Friday, 04 July 2008 | ||||||||
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“[expletive] good article, (you said you didn't mind) but how about options on commodities. Where do you go to look at the option prices in real time? Is there a free web site to follow them? With corn rising, more cattle are coming to market now, which should make the price of beef go up soon, (in my mind). How do I follow the bid ask prices of these markets.” Mark from Colorado I mentioned last week that four letter words don’t hold much terror for a person who went to college to study words, majoring first in English language, then linguistics. Pretty funny, Mark. And you deserve a good answer… if only I had one. Commodities… I don’t do them, and a quick query of my IDE pals shows that the others don’t either. Since I do value investing in Rising Tide, with lots of original observations and research, including some unique systems, and also write an active options trading bulletin in The Optionist, with much attention to technicals rather than fundamentals… that’s about as much as I can tend and feel I’m giving the subject the best possible attention. Trading commodities would call for a whole layer of additional information that I don’t possess. This is a big deal. It seems to me from talking to traders who’ve done it successfully, that they have incredible amounts of truly obscure information. It goes beyond the “X is scarce, I’ll go long” variety. Or “Y is in demand, prices will rise.” If that were enough, there’d be a great trade in pork bellies every July when the tomatoes ripen and enthusiasts’ thoughts turn to BLTs. For instance, I’ve heard that commodities traders often use point and figure charts, which I use on stocks. They are supposed to be very popular with savvy Forex traders, too. But they know how to adjust the reversal signals and “box” sizes differently for each commodity. They know seasonal patterns and how the market reacts to them… really successful traders seem to stick to a couple of commodities they know intimately.
But there is something you can do through stocks with those insights. For instance, in late 2005 as I was researching the annual Sector Outlook report, Rising Tides, I noticed that steel and ore stocks were historically undervalued. It turned out from my research that their P/E levels were generally higher than I realized in the long run, and this was a bargain that was somewhat hidden from the casual observer. So, I chose a leading company in the ore business and it’s been on a tear ever since. You will notice, though, that the trade took a little more insight than just observing ore prices were rising, because the stocks in a hot group might be getting enough attention to be overvalued. The reason the investment was safer than it might have seemed to a casual observer was that I could tell the stock wasn’t overvalued despite having already gone up 100% in the previous year. That came from what I know about stock fundamenetals. To do the same thing with commodities would take the same kind of background information, I am sure. But if you really want to trade commodities, start by reading. Jim Rogers has a book on commodities trading, and his writing tends to be very approachable. Then go on to the heavy stuff. I wish you luck, and let me know when you’ve made a [bad word] fortune, Mark. As for real time quotes—I get mine from Scottrade for stocks and options. Even Yahoo has real time stock quotes now. After you’ve read some of those books, you can probably tell me where to get real time commodities quotes. Lynn Carpenter P.S. To let me know what you thought of today's article, send an e-mail to: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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