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WhiteMan asked another timely question about the details of my commodity purchases which merits an extended response.
Click any of the charts to enlarge.
![](http://1.bp.blogspot.com/_WAi2txkagVM/Ru5_xq2qGvI/AAAAAAAAAxE/XaNLn1eJGoI/s400/sugar_daily_sept_17_07.jpg)
Above is a daily graph of "October Sugar". My average purchase price was $9.80 (read as 980 on the chart). I bought it back in mid-August and since then it obviously took an immediate dip down to $9.10 and currently hovers at $9.42 as I type this. I have since rolled this position to a March contract.
![](http://2.bp.blogspot.com/_WAi2txkagVM/Ru5_s62qGuI/AAAAAAAAAw8/5XwmdIr6Rms/s400/cotton_daily_sept_17_07.jpg)
Above find December Cotton's daily chart. I got in at $61.67, it dropped to $57.00 right in my face before recovering to $63.76 as I type this.
![](http://2.bp.blogspot.com/_WAi2txkagVM/Ru5_n62qGtI/AAAAAAAAAw0/Gsa-HXEQFLE/s400/coffee_daily_sept_17_07.jpg)
Above is the wild ride of December Coffee. My average purchase price in mid-August was $1.2485. In the "credit crunch" induced broad market sell-off it dropped quickly to around $1.15. But as I type this it is the pleasant surprise du jour. It's up a whopping .0450 ticks today to $1.2540. Don't let the decimals distract you; that's a 3.7% up move today. That would be mathematically akin to a 495 point move in the Dow from today's level of 13,400.
As you readily see, commodities can really move.
![](http://1.bp.blogspot.com/_WAi2txkagVM/Ru5_iq2qGsI/AAAAAAAAAws/ZKRqLlb8J4o/s400/cocoa_daily_sept_17_07.jpg)
Lastly, above find December Cocoa. My average price is 1,891. The chart illustrates that I weathered an immediate dip to 1,750. As I type this, the contract has recovered to 1,873.
Summing it up. I am down about 4% in sugar, slightly down in cocoa, and up in both cotton and coffee. So presently I am up a very small amount of money - albeit I was looking at red numbers in all four for a month until about a week ago.
I have been thinking long and hard about how best to play this commodity market - given that we are already half a dozen years into the bull market AND that trading commodities is not exactly my forte. Here's where I stand presently
- I have decided that the four commodities I bought, cocoa, cotton, sugar, and coffee, will be "investments" that I won't try to trade around - meaning, I won't sell when they pop and look to buy them back cheaper. They will be rolled forward indefinitely. I will continue to barely even look at them - as I do with my shares of Google.
- I will not short any commodities. As tempting as it is to look at soaring Wheat and Soybeans and give them a whack, I will refrain from making the same mistakes I made with tech stocks during the Nasdaq Bubble. I will be long and flat - but never short. There's always money to be made on the short side, but I will let somebody else have it.
- So primarily, I will look to rotate into whatever commodities are beaten up - much as I did when I bought at ton of oil at $51 this past winter. Sugar I believe is ripe for the taking now after its cruel 50% drop from its December '05 peak around $20. Hence I bought a little more of that than the others.
So again, with commodities, the initial dollar investments are big and the volatility is somewhat scary.
![](http://2.bp.blogspot.com/_WAi2txkagVM/Ru6MI62qGxI/AAAAAAAAAxU/vevyRZBZnIo/s400/goldman_hedge_losses2.jpg)
![](http://3.bp.blogspot.com/_WAi2txkagVM/Ru6MFK2qGwI/AAAAAAAAAxM/Ath1jE40D6U/s400/goldman_hedge_losses.jpg)
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I have to laugh when I see these recent headlines about big hedgefunds losing 5%-15% in a month. 15% is often a daily fluctuation of my trading account!
(Remember, I only trade 5-7% of my money.)
Keep the questions coming. First and foremost I am going to try to make myself money. But I will share ALL of my thoughts and insights. With some money, a little luck, and my formidable powers of articulation...
![](http://4.bp.blogspot.com/_WAi2txkagVM/Ru6ONa2qGyI/AAAAAAAAAxc/YQUyiX0Rt-E/s400/trading_places.jpg)
ANYONE should be able to make money from commodities.
If you don't know the movie, go and rent it!
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