Martin Kronicle

I was very fortunate to have taken several classes with Robert Mundell. Mundell had a lot to do with inspiring me to trade commodities and the interbank.

Mundell is going to be on a panel with Nouriel Roubini at the Milken Institute’s Global Conference later this month called “The Eurozone: Still One for All and All for One?”

Here is the description of the panel from the MI website:

The debt crisis in Greece has seriously frayed the ties that bind the Eurozone together with a monetary union but without fiscal transfers. Unable to afford the expensive social programs its citizens demand while staying within the Eurozone’s debt limits, Greece can neither raise import tariffs nor devalue its currency. The stronger member nations — especially Germany — are torn between their distaste for a bailout and the need to prevent the crisis from spiraling any further. Is there a need to create a European Monetary Fund? Will the euro manage to recover? Do ballooning deficits in Spain, Italy and Portugal signal further storms on the horizon? This panel of experts will explore whether the Eurozone can forge a successful system of joint economic governance.

You can watch the Robert Mundell Bloomberg interview. It’s long, but great!

In order to feed your brain, you actually have to feed it. You do that by reading, not listening. It’s true that we learn by listening and writing also, but reading is the most fundamental and economically viable way to learn for most of us.

Most all of the major traders/wizards that I have met are voracious readers: they read everything. Two of them that I know very well and whose houses I’ve been to don’t have bookshelves…they have book-ROOMS…with titles on commodities that go back to the beginning of the century. Heaven!!!

Here are my favorite books from 2009.

According to The Economist, e-books and e-publishing are the future. Maybe this is slightly hyped b/c of the iPad launch, but consider this: with RSS readers and ebooks, online magazines, and online newspapers you technically don’t need to buy any paper-based reading material anymore…unless you like the feeling of holding a book.

I like books, but I love my RSS Readers and Kindle too. They allow me to consume an enormous amount of material in much shorter periods of time than if I had to hold the written material on paper. I read as much as any CIA analyst.

So each day, I read from my RSS Reader, my Kindle, books, and Twitter search results. And when I’m done with all of that, I’m looking through Gutenberg Project for free things to read that I can upload to my Kindle. One gem I’ll give you for free that I uploaded to the Kindle was Fiat Money Inflation in France by Andrew Dickson White. A very timely read indeed.

From The Economist:

“Like many other parts of the media industry, publishing is being radically reshaped by the growth of the internet. Online retailers are already among the biggest distributors of books. Now e-books threaten to undermine sales of the old-fashioned kind. In response, publishers are trying to shore up their conventional business while preparing for a future in which e-books will represent a much bigger chunk of sales.”

The amount of sales now is tiny of overall book sales – 6%. But once the word gets out about how much you can get for free on the internet AND once Google gets involved, you’ll see competition for better devices and lower costs for books (unless they collude).

To avoid volatility, stop trading – Ed Seykota

Bloomberg reported on the IEF meeting in Cancun in an article called “OPEC, IEA, IEF to Unveil Measure to Combat Oil-Price Volatility.”

After reading the article a few times, I’m of the mind that the market knows more than any bureaucrat or government agency here or elsewhere.

Here is one thing that I believe will lower volatility in crude oil futures trading:

1. Lower margin requirements to allow for more participants, therefore, increased liquidity.

As far as everything else listed in the article, it’s all political, biased, and agenda-based. I don’t know who of the CFTC, FIA, or MFA was at the conference in Cancun.

As far as peak oil is concerned, demand for crude did wane, but production fell faster. Who controls production and what incentive do they have to be “open and honest” with their counterparts, or in the case of OPEC, other member nations?

2. Implied volatility tells you nothing about the future – it’s not predictive at all.

3. American driving patterns and heating oil consumption are seasonal, and are fairly predictable year over year. Who is Secretary El-Badri of OPEC kidding? He applauded the U.S. for “putting some brakes on speculation. It’s a positive step in the right direction.”

Really? How about creating a standard within OPEC to consistently meet the world’s needs for crude oil and it’s distillates.

4. OPEC is the world’s largest commodity pool and isolated group of speculators on the planet. Collectively, they control 40% of the world’s oil. I don’t think anyone at the CFTC thinks of them that way though, probably b/c they can’t regulate them.

High prices cure high prices. We have to live with the fact that OPEC members can turn the spigot on an off at will.

Regarding CFTC Limits

“The U.S. Commodity Futures Trading Commission, which oversees more than $5 trillion in daily trading, in January proposed adding limits to the energy markets as part of a government campaign to prevent individuals or companies from gaining too much control of a commodity market.”

5. Individuals and companies don’t want to control an expiration month or several of them. It’s too illiquid and can lead to catastrophic losses. The US commodities markets have never had such a meltdown such as the subprime morass.