I’ve been slowly trying to get back into the rhythm of the marketplace and then hopefully I will be able to continue researching some opportunities. Nothing looks promising so far, and this quarter has been turning out to be a very low transaction period.
It seems like when Osama Bin Laden got shot, that it also took out the wind of the commodity market. High-risers, especially silver, got pummeled this week:
Who wants to be the person admitting that they bought Silver at $50 an ounce?
Anecdotally, I was walking down the street a week ago and remember these two people walking out of a currency exchange store, and they were clearly holding silver coins as they exited the place. Maybe I should have taken this as some sort of contrarian signal and short the commodity, but I was too busy with other matters to do so.
Also, it is my opinion that the indexes appear like they will be treading water and not exhibiting the run-up that they were doing between September 2010 and February 2011.
The silver drop can be accredited to a big hike in the margin requirements for trading contracts:
http://www.ft.com/cms/s/0/6520b326-773d-11e0-aed6-00144feabdc0.html#axzz1LaCFLmQG
It could have been a really attractive stock to short, the question however is, at what price?
If it was just about silver, then the margin requirements would have only had an impact on silver.
Instead, it seems that there is a lot of capital locked up in commodities and that demand might have topped out at previous price levels. I bet a lot of leveraged players got cleaned out over the past week.
There could be a lot more going on, investors/speculators could have been selling other commodities in fear of margin requirement hikes for commodities in general. The argument seems too simplistic.
But yup, whoever was leveraged in silver (at the wrong price) probably had their rear handed to them from this drop.