Trading Commodities to make some fast money!

Darnell L Williams

I wake up at 4:00 AM EST to check the prices of commodities especially the price of oil. I make a living off of oil. I use the many products from oil, from fueling my car and lubricating it to using all the different plastics made from oil.  So oil is a big part of my life and I suspect it is a big part of your life as well.  

Oil is a commodity that is traded on a Commodity market like other commodities such as Gold and Silver. Corn and Black Eyed Peas are commodities.  Bacon and chicken are commodities.  

We are going to find out what are commodities and how are they traded?   

 Click on the link below or on the picture.

https://www.youtube.com/watch?v=nGZn_pGT_PM

 What is a Commodity?

The InvestorGuide Staff Writers and Editors explain commodities this way!

A commodity is a product, which is of uniform quality and traded across various markets. There are generally two types of commodities, 'hard commodities' and 'soft commodities'. Hard commodities include crude oil, iron ore, gold, and silver and have a long shelf life. Agricultural products such as soybean, rice or wheat, are considered 'soft commodities' since they have a limited shelf life. These commodities have to be similar and interchangeable or 'fungible'. For example, soybean from one country or market should be of the same quality wise as soybean from another, or gold in one country should be of the same purity as gold from another.

Consumer products like televisions or computers vary from manufacturer to manufacturer and hence cannot be traded as commodities. But now, electricity, bonds, and currencies are also traded as commodities across the globe.

These commodities are traded across markets situated in different corners of the world through commodity exchanges such as the New York Mercantile Exchange, the Chicago Board of Trade, the London Metal Exchange, etc. These exchanges consist of traders who are classified as hedgers or speculators. Hedgers are actual manufacturers or farmers who want to sell their commodities at a guaranteed price, so that they are insulated against any price fall or fluctuations in the market.

Speculators are traders who enter into the market solely to make a large profit. If the speculator has information that natural disasters are destroying wheat in a particular country, he will try and purchase wheat as soon as possible, since he would expect the price of wheat to rise in the coming days. Speculating requires a keen business sense and an in-depth understanding of the market or the losses incurred could be significant.

Traders do their trading in any of the above commodity exchanges in the following ways. Spot Trading occurs when the deals are done on the spot regarding price or delivery, or if the delivery takes place in a minimum amount of time after the trade is finalized. Trading is also done by way of 'Futures Contracts' where the price of the commodity is decided immediately, but the delivery is made after a certain period of time. 'Futures Contracts' benefit either the buyer or seller since the price, which is agreed upon could change marginally or drastically by the time the delivery is actually made. These contracts can give buyers and sellers a way to 'foresee' the market in the future, since the rates have already been set. These markets are quite open and transparent, but to prevent fraud and misuse, the government has set up 'The Commodity Futures Trading Commission' or the CFTC, which keeps a close watch on the trading market.

The delivery date and the method of payment must be agreed upon before the contract is executed. Since commodities are physically and actually present, the chances of bankruptcy are nil, but profit and losses on a large scale are possible because of the sheer volume involved in trading. You too can directly invest in the Commodities market, but if you do not have experience, then it is better to go through a commodities broker. His vast knowledge and contacts will help you save time and money.

The commodities market is based on the simple principle of supply and demand. Since there is a lot of demand from emerging economies such as India and China, some commodities such as crude oil and steel are in very high demand. Hence trading in these items is also very high.

Commodities are in short, similar items grown or produced in different countries and traded in different markets around the world.

Warning;

I worked at Westinghouse Electric at the Telecomputer Center when in my early 20s. I met a man that took $3,000 and traded commodities for 6 months and made $33,000. He was hooked. The next year, he lost $33,000 plus his family savings, a home equity loan, and he borrowed money from his family. I don't have to tell you that his marriage was on the rocks!  

Let's see what you learned.

1. A commodity is a product, which is of uniform quality and traded across various markets. (True or False)

2. 'hard commodities' and 'soft commodities' as well as people are the three major Commodity Types traded. (True or False)

3. Hard commodities have a long shelf life. (true or False)

4. . Agricultural products have a long shelf life. (true or False)

5. Consumer products like televisions or computers vary from manufacturer to manufacturer and is traded as Hard Commodities.

6. Electricity, bonds, and currencies are traded as commodities around the world.

7. __________ are traders who enter into the market solely to make a large profit.

8.  ______ Trading occurs when the deals are done on the spot regarding price or delivery, or if the delivery takes place in a minimum amount of time after the trade is finalized.

9. Trading is also done by way of ________________ where the price of the commodity is decided immediately, but the delivery is made after a certain period of time.

10. The commodities market is based on the simple principle of _________________.

The Answers

1. True

2. False

3. True

4. True

5.  False

6.  True

7.  Speculators

8. Spot

9. 'Futures Contracts'

10. supply and demand

 Results

If you got 10 or 9 right, you are ready for the next step, seeing a Commodities Broker.

If you got 8 or 7 right, read up on the subject and see a Commodities Broker.

If you got 6 right, I don't think that is for you.

You can short your securities and make money

I laugh every time I get  an email from the public when the stock market goes down or crashes. These people think that they are upsetting me saying things like, "How is that stock market treating you?" Just that sentence tells me that the writer knows nothing about the market or what I am doing in the market.  My market strategy has change a lot since the early  1970s and so has the market.

 

At that time, the options market was not open like it is to the public today. Back them, companies sold warrants in the market place and I could buy the warrants or short them as I pleased.  When a warrant was about 2 to 3 years before expiration, I would short them. Then buy them back 3 month before expiration. "I called it free money."  But now hardly any company sells warrants that I can borrow. The options market took its place.  Oh, you don't know what I am talking about? Let's take a class on short selling!

 

We will use the information from Michael Griffis and Lita Epstein, book  "Trading For Dummies, 3rd Edition." You can buy it at any book store.

   

Selling stocks short is common in the trading world. When you sell a stock short, you sell something you don’t have first and buy it later with a goal of profiting from a falling stock price. To sell a stock short, you borrow shares of a stock from your broker to sell them in the open market. Your broker gets those shares from its own inventory, or from other clients.

 

The proceeds of that sale go into your account. To close that position, you must buy the shares on the open market and return them to the broker. If the price you pay for the stock, or the buy-to-cover price, is less than your selling price, you’ve earned a profit on the short sale. Conversely, if the buy-to-cover price is higher, you’ve suffered a loss.

 

Say you borrow 100 shares and sell the shares short for $100 per share. When the price drops to $80 per share, you buy the shares back and return them to your broker. You sold the stock for $100 per share and bought it back for $80, netting a profit of $20 per share. It’s the same if you purchase the stock for $80 and sell it later for $100.

 

Conversely, say you borrow 100 shares of Company Y and sell them for $100 per share. The stock price rises to $120 per share, and you decide to cover your loss. You buy back the shares and pay $120 per share, but you sold them for $100 per share. You have lost $20 per share on this trade.

 

Some of the quirks that are unique to selling stocks short include:

 

·         Paying dividends to the lender.

If the stocks pay a dividend during the time a short seller holds a position, short sellers pay the dividends on the ex-dividend date to the people who loaned them the stocks. Short sellers need to keep the ex-dividend date in mind whenever shorting stocks.

 

·         Being forced to close a position.

Whenever the original owner sells the stocks you borrowed, your broker can call away the shorted shares, which means your broker can force you to return the borrowed shares by buying them on the open market at the current price. This happens rarely and occurs only when no shares are available for shorting.

 

·         Mandating the execution of short sales from only a margin account.

Short sales must be executed in a margin account because your broker loans you the stock to sell short and charges you interest on any margin balance in the account.

 

·         Paying margin maintenance requirements.

Your broker can force you to close a short position if you’re unable to satisfy maintenance margin requirements.

 

·         Having no or only minimal access to selling some stocks short.

Lightly traded stocks may be unavailable for selling short, and when they can be sold short, they may be more likely to be called away (which happens when the original owner sells the stock you borrowed and your broker is unable to borrow additional shares).

 

·         Restricting short sales on certain stocks.

You can’t short a stock that’s less than $5 per share, and you can’t short initial public offerings (IPOs), usually for 30 days following the IPO. And, as became evident during the credit crisis, regulators can prohibit short selling on whole categories of stocks.

 

·         Limiting short selling to only stocks on an uptick.

This uptick rule was eliminated in July 2007, but a modified version was implemented again in 2010. The essence of the old rule was that you couldn’t sell a stock short in a falling market. Short sellers could not easily pile into a falling stock. The 2010 rule does not apply to all securities.

Today it’s only triggered when a security’s price decreases by 10 percent or more from the previous day’s closing price. The rule then stays in effect until the close of the next day. However, many people consider this new version of the rule to be ineffective.

 

One unusual aspect of shorting is that it creates future buying pressure. Every shorted sale must be covered, and that means that every share of stock that’s been shorted must be repurchased. Future buying pressure can cause the price of a heavily shorted stock to jump dramatically if all the short sellers simultaneously clamor to get out of their positions as the price rises, a situation called a short squeeze.

 

You can find out how many others are shorting the stock by looking at short-interest statistics published in Barron’s and Investor’s Business Daily near the end of each month. From those statistics, you get some idea whether your short position is likely to be squeezed.

 

Now let's test what you have learned here!

 

1. If a stock closed on Tuesday, July 14 and you want to short that stock the next day. That means that, the short sell is only triggered when a security’s price decreases by 10 percent or more from the previous day’s closing price.  (True or False)

 

2. If the stocks pay a dividend during the time a short seller holds a position, the dividend is not paid. (True or False)

 

3.  Short sales must be executed in a __________ account. A) Cash; B) Margin; C) 401K: D) 521.  

 

4. Your broker can force you to return the borrowed shares by buying them on the open market at the current price. That means that you may take a loss or a profit. (True or False)

 

5. All stocks can be shorted. (True or False)

 

6. Your broker can force you to close a short position if you’re unable to satisfy maintenance margin requirements. (True or False)

 

7. You have not borrowed any money in a short sell so your broker cannot force you to satisfy maintenance margin requirements since you have no margin requirements. (True or False)

 

8. You can’t short a stock that’s less than $5 per share. (True or False)

 

9. You can’t short initial public offerings (IPOs), for at least 30 days following the IPO. (True or False)

 

10. Short Sellers must understand that a loss when short selling is unlimited.  (True or False)

 

 

Answers

1. True

2.  False

3.  B) Margin

4. True

5.  False

6. True

7.  False

8.  True

9. True

10.  True

 

If you got one or none wrong, you got an "A". You are ready to start short selling.

If you got two wrong, you got a "B".  You can start some limited shorting.

If you got three wrong, you better use short with the help of a broker.

If you got four wrong, read up on the subject before you short stocks.

If you got more than 4 wrong, stock with buying stocks and bonds.

     

Why You Got Surprise by the Great Financial Crisis

Greece

Why did most of you get caught not knowing that Greece and Puerto Rico was in the middle of a financial crisis that will come down on you like a ton of bricks? Was it because a group of people from the banks to the Pension fund managers did not want you to see it coming?

 Well they did a good job of keeping you in the dark. I watch the World's Financial Markets from 8:00 PM to 6:00 PM every day, looking for stuff like this. I saw and tried to warn people for 3 years about Greece. But even me was caught off guard by the Puerto Rican crisis.  That is how secret this crisis was kept.   

Puerto Rico



Bate and Switch

Politicians do two things: they have their friends put out propaganda on personal media about how good things are going. Second, they monopolize the media, telling people other things to take up media time.

 

For example; the nightly news is 30 minutes long.  For 10 minutes, they have commercials and introductions. They have to pay the bills and they have to introduce the show.   

 

They spend 10 minutes talking about the major story going on at that minute such as, a politician caught sexing, a white man shooting up a Black Church, or Russia invading a country that they occupied at one time.  I am not saying that these stories are not important. I am saying that that someone decided to use all this time for these stories.

 

The last 10 minutes of the show is used to show some type of human interest stories such as a bear trying to get into a car. A cat standing up to a bear. One story I saw last week, a private rocket heading for the space station blew up and the Astronauts are not going to get their "Fruit Loops" this week.

 

But if you notice, the media cannot find time to tell you about a story that eventually affects your financial stability. You have to ask why?  

 

Click on the link below.

 http://www.msn.com/en-us/money/markets/puerto-rico-governor-calls-debt-unpayable-as-deadlines-loom/ar-AAcgJsB?ocid=ansbloom11

 

Puerto Rico Governor Calls Debt

Unpayable as Deadlines Loom

You May Ask How does it Affect Me?

 You may have retired already or you are planning to retire in the near future. The money that you are getting is guaranteed by the Pension Plan but the amount that you are getting may not be guaranteed by the Federal Government.   Your guarantee comes from the Pensions Investment Portfolio not the US Treasury.

One of the municipal funds your money may be invest into the Oppenheimer Funds directly or indirectly. One of the largest investments  in the fund is Puerto Rican Obligation Bonds.  Click on the link below to read about the fund.

https://www.oppenheimerfunds.com/investors/

Puerto Rico Gov. Alejandro Garcia Padilla surprised everyone coming out this week, saying that Puerto Rico cannot pay on its obligations.  Mutual Funds own these obligations.  If they do not pay the funds, investors will sell the funds.  The fund prices will fall, making these funds cheaper and the owners will lose its value. Who are the owners? The Pensioners like you. When it comes to getting your pension money, you will get less than what was promised or none at all.   

 

In my opinion, the world investment community knew about Greece for over 3 years but most just found out about Puerto Rico in the past few days.  The Millionaire's Confidence Index has gone from 16 to 6 recently.  The rich are not putting new money into the Stock Market or the bond market.  Many are not investing at all.  That is how bad the world economy is around the world.

 

As I keep telling people, we are not in a recession, this is the " First Great Depression of the 21st Century."

NETFLIXS: A Miss Opportunity

Let me tell you the story of how I missed out on Netflix Stock. It started at $6.99 in 2002.

Netflix Inc (NASDAQ: NFLX)

June 26, 9:52 AM EDT

$659.60

▼ $4.80 (0.72%)

High:	$667.20
Low:	$659.60

Open:	$667.20
Vol:	179.39 K

Click on the link below or click on the picture to hear an analyst talk about Netflixs. https://www.youtube.com/watch?v=6RhKCkjRd5g   About 12 years ago, I was working at night in the Harrisburg Post Office Plant. A coworker came up to me and said that she started investing in Netflixs at around $10.00 per share. She said that she noticed that the Netflixs packages started coming in one or two at a time. Then it was a tray or two at a time. Then a bin of  Netflixs per day started coming in. Last, we had a section set aside for Netflix Processing.   Like a fool, I did not buy any. Read what is going on with this stock today. http://www.fool.com/investing/general/2015/06/25/netflix-inc-stock-split-its-no-big-deal.aspx Netflix shares opened at an all-time high recently of  $700.50, with investors apparently surprised that the leading video service had declared a 7-for-1 stock split that will go into effect next month. That means if the stock is selling for $700 and you have one share, you will have 7 shares at $100 per share. In my opinion, usually after a split in an "In Favor" Stock, the stock will go down before the stock goes up. But the long term trend in Netflixs should be up!

In this Vacation Time, Protect your Money and Property

Darnell L Williams

One thing that has been true since civilization started has been that criminals believe that they have money and that your money is their money.  That is why you have to protect your money from criminals.  This is why I am going to bring you protection information from TransUnion.

Vacationers often unknowingly leave their personal information exposed to thieves while traveling, which can turn a worry-free break into a prolonged and stressful fight to reclaim a stolen identity. Here are nine simple ways to protect against identity theft this summer:

1.     Be careful about using public Wi-Fi. While free Wi-Fi is great, avoid checking your bank account on Wi-Fi in hotels, coffee shops and restaurants. Many public Wi-Fi connections are not secure, making it easier for thieves to capture personal information.

2.     Consider using a privacy screen on your laptop while traveling on a plane or bus. With limited personal space on public transit, it can be easy for your seatmate to view your information.

3.     Safeguard your wallet. Some summer destinations are notorious for pickpockets that target tourists. If your wallet is lost or stolen while traveling, immediately place a fraud alert on your credit and notify card issuers.

4.     Keep copies of your credit cards and passport in a safe place (such as a personal safe or locked suitcase) in case your information is compromised. Having your credit card numbers handy helps banks or card issuers protect your information even faster.

5.     Shred travel documents containing sensitive information after they’re used. Or, keep boarding passes or other tickets on your phone and immediately delete them after the trip.

6.     Schedule bill payments ahead of time. Avoid making bill payments while on vacation, as it adds another opportunity for thieves to steal your identity. It can also help you avoid late payments that can hurt your credit in the long run.

7.     Consider freezing your funds if you believe you may be in a vulnerable position. Contact your banks and credit card companies if you think your information has been compromised.

8.     Stop your mail while on vacation. Leaving credit card offers stacked up in your mailbox makes them easy to steal.

9.     Don’t be so quick to share vacation plans on social media. It’s easy for thieves to monitor social media sites like Facebook and Twitter and see when you’ll be away.

Taking reasonable precautions while on vacation won’t just keep your identity safer this summer, it’ll also give you peace of mind so you can focus on enjoying time with family and friends.

Being Defensive when investing in Corporate Bonds

I have a friend who claimed that he was investing in corporate bonds.  I asked him what bonds did he own? He said that he bought his bonds in the share builder's Plan and they were high yield bonds.  His statement was my first clue that he did not own Corporate Bonds. He had bond funds.

 

Many times, brokers and other people will pull a bait and switch on unsuspecting people. They tell customer that bonds are bond funds. This has been going on since the 1980s. Here is the reason why I started educating people on the difference between bonds and bond funds.

 

When interest rates decline, bond funds go up because the rates given by other investment keep pace with bond investments. That also means that the bond interest of the individual bonds go down. When interest rates go up, bond fund prices go down because bond interest rates go up.  Since it is a fund, the investment never matures. Here is why I stay away from bond funds. 

The beautiful Becky Quick dumped all of her bond funds. She explains her actions here. 

 

(Becky Quick), Rebecca ("Becky") Quick (born July 18, 1972) is an American television journalist/newscaster, co-anchorwoman of CNBC's financial news show Squawk Box. Quick is currently based at CNBC’s New Jersey headquarters.

 

I opened my first brokerage account when Becky was born.

 

Here is why I invest in Corporate Bonds. My interest is locked in. They mature on a date and I get my money, interest usually every 6 months and usually $1,000 on a date.

 

For example, I bought;

 

Cloud Peak Energy Resource LLC CPE SR NT has a coupon of 8.5% on $1,000 or $85 per year, that matures on Dec. 15, 2019. So if you bought this bond at $900.00, you will get $1,000 on the maturity date. If you bought the bond on December 15, 2015, you will receive $85.00 times 4 years or $340. That means on a $900 investment, you will get a $440 return. Your risk is Cloud Peak Energy Resources filing for chapter 11.      

    

Click on the link or on the picture.     

https://www.youtube.com/watch?v=I1PWBsUZvUE

 

CNBC's Becky Quick Dumps Bond Funds

 

Becky Abandon Ship

Becky got out of High Yield Bond Funds at the top of the Market.  Now interest rates are going up, bond funds are going down because of what I told you about the inverse actions of interest rates and bond prices. Bond funds become illiquid because everyone is running to the door at the same time and prices fall like a rock.

 

Read this article, " Could the Bond Market Be Transformed?" and you will see how Becky quick saved her 401K from destruction.

http://www.newsmax.com/Finance/Robert-Feinberg/Bank-Merrin-Newmark-El-Erian/2015/05/19/id/645469/

Could the Bond Market Be Transformed?

 

What am I doing about this?

As for me, I own the bonds. As interest rates go up, my bond prices go down. My interest that I get is locked in. But my bonds mature and I get $1,000 no matter if I paid $900 or $500 for them.  My only worry is the underlying company files for bankruptcy.