NS: I can't believe it LT -- we did it! We beat Tom DeMark!
LT: We are not in competition with anybody NS. Boon gave us a plan, and we executed it accordingly. Boon and I have great respect for DeMark. He has produced some very solid work over the years. There are many so-called "professionals" who gave technical analysis a bad, bad name, "who can't make their millions in the markets but opted to sell their lousy systems", as said by Boon before [1]. DeMark is surely not one of them. DeMark's work is never sold publicly. Many traders, even if they are fundamentalists, rely upon DeMark's indicators to time their trading decisions. DeMark has served as a consultant to the Soros Group, JP Morgan, Citicorp, and Goldman Sachs among others. In the 1980s he was executive vice president of hedge fund Tudor and has been a special consultant and partner to SAC Capital [2]. We respect and admire his work very much.
NS: Very well said. But I still don't understand why and how Boon could have taken this long position in Crude Oil while so many big names out there are calling for a top. Is mind blowing to me -- this is crazy!
LT: Well, people said Warren Buffett was "out of touch" when he was shying away from Technology stocks completely in the late 90s and bought back a big chunk of the shares of Berkshire Hathaway in March 2000 (Figure 1) when most "analysts" thought the stock was going to go down even lower and Technology stocks will be the "new era". Guess what -- it was the month when NASDAQ peaked before subsequently plummeted nearly 75% while Berkshire Hathaway made a turn before climbing steadily towards today's 132,475.00! What a great market timer Mr Buffett! People called Jim Rogers a "crazy old man" when he was shying away from Technology stocks and licensed a commodity index under his name while Merrill Lynch decided to get out of the business in Commodities *completely*! Guess what -- the bull run in Commodities took off within the next 2 years and now EVERYBODY is talking about it! Even the price of rice goes up up up recently, doesn't it? People called George Soros stupid when he went against the Bank of England and shorted the Sterling. Guess what -- he is now "the man who broke the Bank of England" [3]. You know, the line between a complete nut and a great opportunist is never clear *after* it is proven by the market. Who knows where Crude Oil is heading. When it is at $150, the price we paid will look very "cheap"!
NS: I don't know what to say.
LT: A big investment bank was calling for Natural Gas to tank in 2008, saying it is going to go down more and more due to a glut of supply in the US. Boon went completely against it, buying it at 7.X [4]. Natural Gas is now trading at 10.X. Bottom line: It doesn't matter who's calling the top, because they could be proven wrong by the market if they didn't do their homework *correctly*. These are banks which give buy, hold, and sell recommendations on TV, magazines, newspapers, etc, but they are also the very same banks that are now beaten up by the subprime and "worst market crisis in 60 years", as described by George Soros [5]. You would have thought that these big guys should be smart and will have very clever risk management, wouldn't you? Well, they are all in the same subprime mess together needing the Fed printing gigantic amount of money to bail them all out!
NS: Yes, Boon also went against Boone Pickens as well not too long ago [6, 7, 8, 9]. And back in Sep 07 he also predicted that the now apparent US recession is inevitable and calling the bull trap in Dow 14,100 [10], while most "strategists" on Wall Street were calling for targets of 15,000, 16,000, and some even 17,000! Herds, all herds driven by sheer greed and stupidity!
LT: Boon will have done his homework before decided to take this position amid the sell calls by the other big names. He saw this as an opportunity of which he can maintain his consistency. Over the years I have been working with him, we have never gone to bed with an ugly woman, though we might have woken up with a few -- a similar famous quote by Warren Buffett [11].
NS: Ha ha ha... so Boon sees Crude Oil as a stunningly beautiful supermodel huh :-)
LT: Every $1 move in Crude Oil is making us $1,000 per contract. In terms of ROC, is well over 100% now -- this babe is drop-dead gorgeous! Though not as good as Natural Gas, yet, of which each $0.1 move is making us $1,000! All the entries we took were *anticipated* and published *beforehand* by Boon [12, 13, 14]. Tell me, how much better than this can you get elsewhere?
NS: Yes, he's always so, so good, confident, and consistent. He doesn't even bother to stay in today. I guess he's at Starbucks enjoying his favourite milk chocolate mocha again huh...
LT: Hey NS, do a Google search on "DeMark Crude Oil" [15] and see what's coming up...
NS: Huh... what's coming up? Something interesting? Ohhh... ssshhiiiTTT !!!
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The above was an exchange between LT and NS, my team members. It was an edited version based on the actual conversation taking place through their MSN Messengers. LT is my lead trader, while NS a new starter who joined us not too long ago. I had been reluctant to publish this edited version for a while. However, after some discussion they had me convinced that I should -- all the facts in the conversation are nothing new to the track record I have been maintaining here anyway. And I hope new investors/traders would find it interesting and get a feel of how we deal with the news, facts, and the markets. Do your homework and "only do it when you *knew* you can win" -- this has been the very core of my investing/trading philosophy. Don't speculate, don't listen to tips. The only reason you are participating in financial markets is because you want to make money -- and you knew this deep down inside you. You must develop a methodology that looks beyond the Fed, the governments, the SWFs, the media, etc. Learn to interpret facts, news, and prices independently. I know is not easy, but there's simply no other ways for achieving bigger successes in financial markets.
I am constantly looking out for new inspiration to improve the framework I have been employing all along. Recently, I have introduced a new combination of share-bar charts that will be used alongside the tick charts I have been employing. By understanding the invariants and the propagation of strength and weakness across various time frames, I was very certain that a new high in Crude Oil will be made and I narrowed my timing down to that very day I made the 104.04 entry -- it was a price level that was not revisited again by the market after I took it. I do not wish to get into the details here, because I believe such kind of insight is only meaningful if you have your very own market timing model. Every consistent trader/investor is unique, and they will have very different ways of explaining their anticipation. What's important, I believe is, well, their consistency. I believe Buffett, Soros, and Rogers will agree with me on "only do it when you *knew* you can win". I am a huge fan of them all.
If you have enjoyed reading this thread, please feel free to forward it to your friends.
Best wishes
Boon
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4 comments:
Buffett may (or may not) have talked about buying back Berkshire Hathaway stock in March 2000, but I don't believe he actually did it.
I cannot believe it, what a night! I have been long on oil stocks right about the time you were long on them and I had faith in your call.
That 5 minute delay in the supplies report had me going. I was wondering what happened? Technical glitch? Is it too high or low and they're checking again? Wow! When I heard the crowd at the Nymex floor scream in delight I knew we had what we wanted. Weaker than anticipated supplies for crude light and gasoline! Gasoline's weak supply was big! Then oil rallied higher after a volatile morning and I breathed a sigh of relief.
Well done Boon, amazing pickings! What now?
We have supply uncertainties in Mexico and Nigeria and a US summer driving season coming with weaker supplies? Not to mention Uncle Ben cutting rates most probably by end of the month that'll further support these levels.
Is it going to go higher? If so how high? Stabilize at $110 - $115? Or will all this calm down and will price retreat?
Anxiously waiting....
Interesting how the prices peaked at almost $115 and now they have retreated...why the retreat? The dollar is still trading lower to the euro..
naz,
In the world of financial markets, there're no surprises when one has done his/her homework. I wasn't even in front of my screen the day when the supplies report was out. I can't be bothered really.
Personally, I have no idea of how high it could go. All I knew was I didn't think it had peaked. Now we just have to see how "expensive" it could be. Boone Pickens now thinks Crude Oil could hit $150. Such kind of forecast is meaningless to me. I don't like to speculate on it.
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