April: +1.07% YTD 8.04%. Yet another difficult month. I am rather young but I have been around the markets for many years and I can let you know that so far this April is the most difficult month I have ever seen.
Gold and silver have plummeted, and it seems that they are not safe havens anymore. S&P at its highest when the real economy is in such a state, bonds have ridiculously low profits close to 0%, and people seem to want them even if they have to pay for them (negative profits, as in Switzerland). The worst of all is volatility: I can see that if there is a news item with data different from what is expected, the market immediately changes course. I have seen crude drop several times about 3% and then finish in positive territory or the other way round. I could have mentioned any other raw material not only crude. Unfortunately, this for me is a sign that weak hands, i.e. investors with little power, dominate the market. Therefore, money enters and exits the market quickly. In my opinion the powerful investors are outside, looking at this irrational, senseless market from a safe distance.
The bad thing about these conditions is the bandwagon effect. In April I saw good CTAs resale losing a few percentages, which could not have been pictured a couple of months earlier, and this is scary. I can assure you that in these conditions one cannot think ahead for more than one day. The market is changing so rapidly that one is unable to set up strategies for the medium term. This is why presently the spreads, too are really volatile, and the way I see it the market is not what it used to be. So I have decided to operate either on a shorter term basis or with very conservative strategies. I belive that this is what the market needs at the moment. One has to adapt and intend to survive and save the capital.
On top of what is happening in the energy and bond markets, the situation of grains is a little worse. You already know that if grains have it bad, meats husbandry suffers, too. This year planting corn takes longer than expected, which decreases yields, and these circumstances are not at all soothing in a year with very little maize. At the same time, I have noticed that farmers do hedge their harvests. They did cover them last year and could not profit from the rise resulting from the drought. Now -as always, they do the opposite- they do not hedge expecting grains to rise for whatever reason, and they do so when the fluctuations of grains markets are very deviated from the season we are in now. Since the new harvests of grains are deviated livestock has problems. They know that this year there will be a lot of grain, but with current prices of futures it is rather hard for them to cover the costs of necessities they have. So, here is another volatile market that is now very different from what it usually is.
In such circumstances on non-seasonal markets the strategies become volatile and I do not like this. I have reduced positions, and had to close strategies with losses. Aiming to subsist in the market, I have also put new strategies in place with more coverage, so if they lose value it should be the least possible.
I hope the issues around maize will settle down when it is planted, and I also hope that in a few months’ time I will be able to write a more positive report. But until then… the fight goes on.
Should you have any questions, do not hesitate to contact me!
— Gregory Placsintar
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