Friday, February 8, 2013

Some Trader Has Made A Very Big Bet That Something Very Bad Will Happen Within The Next 60 Days

Stocks have been rallyingrelentlessly to post-crisis highs.

Meanwhile, the volatility index (aka the VIX, aka the "fear index") is near historic lows.
But according to UBS's Art Cashin, some options trader has made an enormous $11.25 million bet that the VIX will explode higher very soon.

And a rally in the VIX is usually accompanied by a drop in the stock markets.
From this morning's Cashin's Comments (emphasis ours):

A Very Big Bet In A Somewhat Unlikely Instrument – My friend, Jim Brown, the ever-alert consummate professional over at Option Investor pointed us to a rather unusual trade.  Here's what he wrote in last night's edition of his valuable newsletter:
In past years I have reported on trades that were so large it appeared someone had inside knowledge of a pending event. Sometimes those were massive put positions on the S&P. A new trade just appeared that suggests there will be a market event in the near future. Last week somebody put on a call spread on the VIX using the April 20 and 25 puts. They bought 150,000 contracts for a net of $75 per contract. That is an $11,250,000 bet that the VIX will move over 20 over the next 60 days. You would have to be VERY confident in your outlook to risk $11 million on a directional position with the VIX at five year lows and the markets trying to break out to new highs.

Jim then goes on to list some of the scheduled events and deadlines visible over the next 60 days (mostly in Washington).  When you add in the broad variety of geo-political possibilities, it's a decent reason to stay extra alert.

Hopefully, this person is wrong.

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Why Food Prices Are Heading To New Highs (COW, CORN, WEAT, SOYB, ADM, MOS, SFD)

If you thought your grocery tab was high in 2012, brace yourself because this year will be even worse- but that just means there are stocks to buy now that will let you cash in on higher food prices.
Last year’s drought drove up prices of grains such as corn, wheat and soybeans. Soybean prices jumped 40% earlier in 2012 while wheat prices soared about 50%. Prices declined in the fall as crops were harvested, but remained elevated.

Because of the higher prices of animal feed such as corn and soymeal, many ranchers had to slaughter animals earlier than planned. This caused a brief bump up in meat supplies in 2012, but threatens to lead to tight meat supplies and higher prices in 2013.

The Livestock Information Center in Denver forecasts that this year’s U.S. beef production will come in at 24.8 billion pounds – the lowest level since 2005.

In 2014, the Livestock Information Center forecasts only 23.6 billion pounds of beef will be on the market – the lowest level since 1993. (more)

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U.S. Soy Supply at 48-Year Low as Brazil Ships Held

Dry weather and shipping delays in South America are boosting demand for soybeans from the U.S., the world’s largest grower and exporter, and producing the tightest inventories in almost five decades.

Stockpiles will shrink to a nine-year low of 130 million bushels on Aug. 31, before the next U.S. harvest, according to the average of 31 analyst estimates in a Bloomberg survey. Reserves will total 4.2 percent of demand, the lowest since 1965, U.S. Department of Agriculture data show. The USDA will update its estimates tomorrow.

The drop in supplies will help send Chicago futures up 8.7 percent to an average $16.16 a bushel through August, Morgan Stanley said in a Feb. 4 report. Prices have climbed 10 percent from a six-month low on Jan. 11 as drought dimmed prospects for the crop in Argentina and rain left delivery backlogs at Brazilian ports. The countries are the largest shippers after the U.S., where export sales are up 27 percent from a year earlier, driven by demand from China, the biggest buyer.

“The U.S. does not have the supply to sell more soybeans overseas,” said Dan Cekander, the director of grain-market analysis at Newedge in Chicago, who predicted a rally to $16.50. “Price rationing will have to occur. It may take six months before world supplies are more balanced with demand.”(more)

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$4 Copper on the Way

from Wealth Wire:
Kevin Puil thinks analysts need to be realistic when it comes to copper. The Malcolm Gissen & Associates portfolio manager points to copper’s historic levels at over $3/lb as proof that there are brighter times ahead for base metals as economies around the world continue to industrialize. On the other hand, with economic projects less abundant than they once were, supply is under severe pressure. The good news is, as Puil remarks in this Metals Report interview, there’s money to be made for investors who can pinpoint the right projects. Read on to learn who’s on Puil’s list.
The Metals Report: Kevin, base metals analysts from London to Sydney to Toronto are increasing their price outlook for copper. Do you agree with their bullish outlook for 2013?
Kevin Puil: Yes, I absolutely agree with their bullish outlook. In fact, I’ve been bullish on copper for quite some time. Although there have been many analysts purporting that the commodities cycle has run its course, I disagree.
Read More @

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Steven Madden, Ltd. (NASDAQ: SHOO)

Steven Madden, Ltd., together with its subsidiaries, designs, sources, markets, and sells fashion-forward name brand and private label footwear for women, men, and children. It offers wholesale footwear under the Steve Madden Women's, Madden Girl, Steve Madden Men's, Steven, l.e.i., Elizabeth and James, Olsenboye, Stevies, Big Buddha Shoes, Madden, Betsey Johnson shoes, Report, and Superga to department stores, mid-tier department stores, better specialty stores, and independently owned boutiques in the United States. The company also provides wholesale handbags and accessories under the Daisy Fuentes, Olsenboye, Steve Madden, Steven by Steve Madden, Betsey Johnson, Betseyville, and Big Buddha brand names, as well as sells cold weather accessories, fashion scarves, wraps, and other trend accessories primarily under the Cejon and Steve Madden brand names to department stores and specialty stores. In addition, the company licenses its Steve Madden and Steven by Steve Madden trademarks for use in connection with the manufacturing, marketing, and sale of cold weather accessories, sunglasses, eyewear, outerwear, bedding, hosiery and women's fashion apparel, jewelry, and luggage, as well as licenses Betsey Johnson and Betseyville trademarks for sale of apparel, jewelry, swimwear, eyewear, watches, fragrances, and outerwear.
To review Madden's stock, please take a look at the 1-year chart of SHOO (Steven Madden, Ltd.) below with my added notations:
1-year chart of SHOO (Steven Madden, Ltd.) SHOO has rallied higher since bottoming back in July, and for the entire year the stock has formed a 52-week high resistance level at $45 (blue). A few weeks ago SHOO broke through that resistance on route to a new 52-week high. A pull back to that $45 level could provide a nice long entry on the stock.
The Tale of the Tape: SHOO broke out to a new 52-week high. A long trade could be made at $45 with a stop placed below that level. A break below $45 would negate the forecast for a move higher.

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U.S. Dollar Index

Jim Wyckoff of Kitco provides some good technical comments and charts. Above is the U.S. Dollar Index.
It may not be front page news at the moment but a currency war is underway around the world. Meanwhile, the U.S. Dollar Index is showing a series of lower highs since last November with clear critical support at 78.91. I believe that support can break by early spring and be tied in with gold moving towards $1,800

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Big Gains Ahead With Platinum’s Neglected Cousin / By Byron King / February 6th, 2013
It’s a whitish, ductile metal — No. 46 on the periodic table and part of the platinum group.
People use this material as a catalyst, mostly in reactions involving hydrogen. If you drive a diesel-powered car or truck, you’re sitting on some of it. And it’s a “buy.”
Where are we going with this? Let’s start over 200 years ago, with one of the men who founded the Harvard Law School.
Joseph Story (1779–1845) was born during the American Revolution, and came of age in the early years of the new United States of America. He was a scholar of the U.S. Constitution, and, as I mentioned, eventually helped found the Harvard Law School.
In 1811, Story was appointed to the Supreme Court by President James Madison — who knew a few things about the U.S. Constitution, in that he helped write it. Story was a contemporary of another famous member of the Supreme Court, Chief Justice John Marshall (1755–1835).
In 1833, Justice Story published a study titled, Commentaries on the Constitution of the United States. In a discussion of the Second Amendment, Story stated:
The right of the citizens to keep and bear arms has justly been considered, as the palladium of the liberties of a republic; since it offers a strong moral check against the usurpation and arbitrary power of rulers; and will generally, even if these are successful in the first instance, enable the people to resist and triumph over them.
These days the Second Amendment makes for another discussion. My point is that I like Story’s use of the word palladium.

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