Extreme Investing

Investing in the stock market when everyone is trading can be challenging. "In this market, the future means a return to the past". We have said to many that the next five years will not look like the past five years. A prominent energy trader made the highs this past summer in the crude oil markets covering bad shorts and went bankrupt. Now, today's news talks about the largest hedge fund in commodities is closing its doors after bad long positions in all things related to commodities. They have stated today they will return 40% of what is left of a multi-billion dollar portfolio by the end of this month and the rest by December. These folks will probably make the low for all things related to energy just like the short sellers made the dramatic highs last summer. This hedge fund that is now closing was run by a guy that was regarded by many as the smartest 41 year old in the business. These are what you call "crash signatures".

Don't fight the tape is never more true. Even in investing you have to go with the flow....as global leverage continues to be unwound capital preservation remains paramount. The world is slowing its GDP and that has been by design from all the world's central banks. Australia was the first to lower interest rates yesterday (first time since 2001!) others around the world will now be rushing to lower their rates as well. In the USA, the rates are too low....and might stay that way for the largest commercial banks as they are in their work outs right now. For the big borrowers like private equity hedge funds those costs of capital are going much higher...

With the last four months of the calendar year left traders will be in extreme trading mode to try to save the year and make some of their losses back. The "tape" will continue to be difficult to read to say the least.....as everyone chases daily short term relative strength up and sell short relative weakness in other sectors of the market.

Danny Boy seen here picking apart the tennis ball.