it may be better to be poor

I agree bonds are hell. A company can do everything that is good for their shareholders and be in excellent financial condition, yet if some influential analyst wakes up on the wrong side of the bed and thinks to himself...hmmm people will stop drinking coffee because they will decide cafeine is bad for them or some other stupid hypothesis, 20 companies can go down on the bond market. Its sheer madness. A company can be cashflowing up the ying yang and if an analyst thinks the company might try to buy back some stock to lower its WACC, he will say so and there goes the bond price...even if the analyst has no idea what the management really is going to do with its free cash flow. Its a sorry field and being a corporate finance worker I just shake my head at the power of the rating agencies and the top analysts. They do things that make no sense sometimes and yet they scoff at anyone questioning them.

I have been trading currencies for over 20 years.

I know very little regarding the fundamentals.You mentioned supply and demand.I don't know how you would measure it and quite frankly how would you know if your measurement was accurate?Like many things currencies trade(at least short term)because of market psychology.The Swiss Franc is a

good example.When there is extreme unrest in the world people pile into the Swiss.It's like if Europe goes down the tubes somehow they will survive.Some currencies are basically just rate

sensitive vs.the dollar,but you need to pick your spots.

The bond futures and options are great markets.

Very liquid and lots of opportunities.Easy to scalp or do multi-way option plays.But I find the

best way to trade is to look at all the markets.

Recently the energies have been active as well as

the currencies.

Hi eLROY,


LOL...yes, I guess I am.


A market is a market. For me it's all in the charts. I do have a basic understanding of the markets I trade, but will never know enough to trade on the fundamentals, or the news. Every day I learn something new. That's why I enjoy reading the opinions here.


As for the copper market, I see it as a leading indictor for not only the metals in general, but the overall economy. The new contract started trading in 1988, and it's now testing the lows from 1999. A new low was put in at 60.50 (11/01 on the monthly chart). The bounce to the current price came on the news of the major producers closing mines, and cutting back production, mostly in S. America, but here as well. Came to fast for me and I missed the trade. (no open position here for me)


I'm told that they can operate at profit down to the 50.00 level, but have chosen not to. Well see.

FWIW I would not be surprised to see a test of the 60.00 level. Not a prediction, just an opinion.


Here's the chart: http://www.britefutures.com/BFCharts....asp?symbol=HG


Here's an aside, the average mine produces 16 to 18 Million metric tons, at the rate the world uses copper we go through a mine a year. While there is a LOT of copper in the ground, it gets tougher and tougher to open new mines.


Have a great weekend,


SteveB

Hi wildbill,


The only Bonds I look at are the 30yr, ( for a while...lol) and 10yr. just to get an idea as to the direction of interest rates.


To tell you the truth, the thought of looking at the individual company's bonds never occurred to me [img]/images/smile.gif[/img]

Thanks. I'll pay attention to some.


The Enron thing may bring some changes to the power of the rating agencies.


Have a great weekend,


SteveB

Hi Dr.Bill,


For some reason I'm just not comfortable with the Bonds, If I were to use this vehicle. I just know I'd go broke in a day and a half...lol... or less.


As for the options, I find them very complicated, when used correctly. Leg in, leg out, buy, sell, plus all that Greek.


Good wishes to you,


SteveB

If you are sure you would go broke can I use you as a contra-indicator? LOL...and best of luck

in your trades.I don't mind saying what I have traded recently.I didn't do a lot and I have

an exit strategy if I am wrong. I have been sellin the Feb 10 dollar puts on CPN stock.

(eLROY..thanks for the recomm..I am using interactivebrokers.com.) I have been selling them

for the last few days between (60 and 110)If the stock goes thru 10 bucks at expiration I will start selling the March or April 10 dollar calls.

I am NOT recommending this trade.I am just getting my toes wet as I typically trade options on futures.Good luck trading all!

Flows and positioning are quite important in the short term currency markets. They won't necessarily tell you where the market will go but they can give you a useful insight into the balance of risks. Your example about the Swiss franc is most interesting... the recent rally following Sep 11 was partly driven by psychology but market positioning was a major element. Many hedge funds and other money managers had short Swiss franc long dollar/Euro positions due to the interest rate differential. After Sep 11, the fear that the US dollar would sell off caused a lot of leveraged and speculative money to close out their short Swiss franc trades causing it to rise. Also, Switzerland is a very substantial net creditor and in times of crisis there is a trend to domestic currencies which adds to the effect.


I do think you can successfully trade currencies on fundamentals but only if you are willing to take a very long horizon(maybe 5-10 years). In the short term, they are driven much more by supply and demand which on the large investment banks really have access to.

Well, corporate bonds are very sensitive to any kind of information or rumour... more so recently following Enron. Also liquidity is often not that good in many names so jumps can be quite large. I think a lot of exciting innovation is happening in this sector though.. a lot of interest in option-style valuation. A corporate bond can be viewed as a short put on the company's assets. The KMV model which uses this approach has outperformed S&P and Moody's in accuracy. And also, the whole credit derivatives sector continues to expand and with it new products.