Monday, December 1, 2014

Steen Jakobsen's Simple View

Steen Jakobsen is one man that I really respect that gets sadly grouped with a bunch of other jokers as TV pundits.

Steen Jakobsen is nothing like Dennis Gartman, no no. I don't see him turn up on CNBC that often, though I hear he's more often on Bloomberg or Reuters (since they are more real financial TV). Even when he is on CNBC, the hosts are quite respectful for him, and they should be! I think he is one of the few sane people out there.

His 2015 strategy seems painfully simple.

Long Treasuries
Long value, inflation-related plays once deflation takes hold
Long Silver
Long Nat Gas (through winter)

Hmmm. Oh shit.

Do I like him because of confirmation bias?

I still continue to think that we are going to see lower and lower treasury yields. Real yields on the other hand? I have no idea. Probably negative, haha. Countries with massive debt loads cannot quickly shake off this debt burden so quickly. They will need much more time to work through their debt, meaning that there is a hard ceiling to interest rates. Lower for longer. Jeff Gundlach is another straightshooter than I like that seems to agree, and he doesn't mince words when he says that he thinks treasuries will rally next year.

I think the best time to buy something is when everyone thinks the opposite. The best time to buy inflation-related assets (TIPS, commodities, etc) is when inflation expectations are totally muted. I will be looking out for mid 2015 to go long some plays along this line.

This times in somewhat with Silver, which is supposed to be a good proxy for inflation. However, I think Silver has a particular shine to it (A Short Side of Long seems to concur), considering the Gold-Silver Ratio is at areas where is has previously reversed from. This makes it the superior investment to Gold on a purely relative basis. What we could see moving forward is that Silver will no longer be the leveraged cousin of Gold and would actually outperform, even if the direction is down. Spread trading opportunity maybe? We need to see a better turn in the GSR. Regardless, even as a simple long, Silver is very attractive.

Nat Gas sounds much more seasonal, short term and speculative. I have to admit that I don't know much about this trade, so I shan't comment. However, I am sure Jakobsen is taking good odds suggesting this trade.

Then again, this is just more confirmation bias I suppose.

I am still very skeptical of many things now.

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