Sunday, December 16, 2007

First Post: My First Investment Position.

This is my first post as a blogger. I'm very new to this side of the blog concept but I have been an avid blog reader for some years (my RSS feed has about 145 of them). I love the idea of the blog, the unedited rawness that you find on the internet.

There's no need for the politically-correct softening down of certain topics. No need for the approval of a publishing manager then his manager and finally the general manager to get an article put through. There is just me, the writer, you the reader, and the medium; the blog.

I also love that the responsibility of editing lies solely on the writer. There is no team of proof-readers spilling drops of coffee and cigarette ashes across the pages of my work. In fact, there are no pages period. Just the clean desk.

Not my desk, though. My desk as always is cluttered even as I type this. A box of matches, an ash tray, a fresh pack of cigarettes with only one missing. One empty paper cup and another full of coffee. Speakers, monitor, telephone, and a few scribbled notes. But these are just the things that keep me going, the fuel. The stuff that really matters is slid into 8 Firefox tabs, a word document, a spreadsheet, and a picture viewer.

Which brings me to why I am here. I have thought about blogging for a few years now, but there were first of all several mental obstacles I needed to overcome.

The first was the easiest: Dare I put my thoughts out into the universe of billions of clicking surfers and reviewers? Dare I test my wit and intelligence against the masses? What if I am ripped apart by the old veterans of the roller-coaster landscape of online publishing?

Thankfully I have just come out the other side of a rather distasteful employment experience. To work for some people there just isn't enough money in the world. But that isn't my point. What I learned, the most relevant to this anyway, is that I no longer care. Either way it doesn't affect who I am as a person if someone is interested or disinterested in what I have to say. If they see my insight as valuable or invaluable.

The ball is in your court after today. I am only the referee, calling the plays as I see them.

The second and far more challenging thing was the topic for me to blog about. I don't want to be one of these universal bloggers who grab at everything around them or narrate their own lives to the general public. A reality television book.

This problem arises from the fact that I have many interests, and some of those interests I consider myself fairly knowledgeable. I am a jazz drummer of 13 years, I have played poker profitably both online and in B&M casinos for some years, I am working on a novel that I have several publishers interested in, I have run three successful businesses and sold them since I turned 17 years old.

And I have a profound love for the world of stocks, commodities, and all things investing-related.

That is the topic I chose and it is for one reason. The very same reason that I would never take a job at a bank or large financial institution.

The many resources out there for making profitable investments are almost all there for one thing: to make themselves money. Whether it be a large brokerage house that profits whether or not you make a cent or lose half of your holdings, a subscription-based advisory service, a black-box system that will only work until the market makes a single significant change - if at all, and the many other ways average investors try to make sense of the endless ocean that is the financial world.

The first thing I would like to demonstrate to my readers is that the markets all and one are driven by a singular thing. I will deal primarily with that in my next post. The second thing I will be doing is simply posting the exact positions I will be taking in my portfolio and the reason for taking my position. That is all.

You as a reader can choose to take this advice, ignore it, laugh at it, ponder it, write it down, anything you like. I am simply opening my own portfolio to the eyes of the public.

Right now I am researching several positions that I will be taking in the next 5 trading days. The first position I have solidified is in Crude Oil. Here is the link for the charts on light crude traded on Nymex

Crude Oil Charts

I will be taking up a short position on futures contracts for April 2008. I will also be using the Proshares Ultrashort Oil and Gas ETF found HERE, which is an excellent resource for people who don't trade in commodities options or futures. Proshares offers the only Short ETFs in North America and holds $9 Billion in equity. They are a very reputable firm and only charge a .95% annual handling fee (the average fee is around 2% so they are very inexpensively priced).

There are several reasons that I am taking a short position :

  1. Timing: Oil prices generally take a 5-10% decline from January through May due to decreases in volume because the weather is warming across North America.
  2. BIGGEST REASON: Oil prices have reached a top, which I will show in the following chart, and have formed a head-and-shoulders pattern coming down the other side. This generally means that a large crash-down in price will be occurring in or over the next 5-15 trading days. I am very excited to take this position.
  3. Higher uses of coal in the last 3 years due to high-sulfur emissions has taken a chunk out of the oil market and OPEC is currently keeping demand levels at an inflated amount to cash in for a while. Once this "oil bubble" bursts the price will slide down.
My estimate is that the price of crude oil will be somewhere in the mid-high 70's by April giving me a tidy 20%+ gain. I will show you what I am talking about on this chart, and introduce you to a few of my cardinal rules.

RULE 1 - ALWAYS take a position you are at least 75% sure will run your way.

RULE 2 - ALWAYS set a stop-loss on your position that only risks a portion of your potential investment. In this case I am risking a loss of roughly $2.50/barrel versus a potential and projected gain of $14.00 - $20.00/barrel.

RULE 3 - Pick you entry Point - I will enter this position immediately as it has already hit its third top of the new downtrend. I did decide, when I started considering this position, that I would wait for a strong indicator in my favor. If you go to the charts for this stock and notice over the last month you will see that a clear head-and-shoulders pattern is formed and oil prices are poised on the brink of a decline. I chose my entry point at my estimated half-decline on the right shoulder to catch immediate gains and ride out profits.

This chart without revisions is provided by TradingCharts

This about sums up my first post. I would like to thank in advance anybody who takes the time to read what I have to say, and especially thank any of those who would like to add input to my posts. I greatly appreciate it.

Enjoy the holidays everyone. I will post another position very soon!

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