How to capitalise on other traders’ mistakes

Thursday, 28 March 2019
Adelaide, Australia
By Bernd Struben

  • The ‘grand prize’ for coal
  • ‘Brexit Roulette — Eight Options All Shot Down’

We start today with an email from Murray Dawes that he sent me this morning. One he wanted me to share with you.

If you’ve been following along with Port Phillip Insider this week, you’ll know that Murray’s premium trading service, Alpha Wave Trader, is briefly open to new members this week. That’s the first time he’s taking in new members this year. And the offer closes at midnight this Friday.

You should also have received an email with more information about his trading service. In fact, knowing our enthusiastic marketing team, you probably received more than one email.

I won’t go into further details about Murray’s proprietary ‘slingshot’ trading method today. (You can find all of that here.)

But Murray wanted to clarify a quote of his I shared.

Here’s what I wrote in Tuesday’s edition of Port Phillip Insider:

Instead of relying on lagging indicators [like moving averages], Murray wants to know precisely when momentum in a particular stock, currency or across an entire index is changing:

‘“Buy and sell pivots give you a clear, non-lagging definition of when momentum is shifting. The beauty of using this method to help you make decisions about equity exposure is that we get a signal very quickly to enter and exit the long-term hedge.”’

And here’s Murray’s email from this morning:

G’day Bernd,

I was having a read of this week’s Port Phillip Insiders and came across a line that made me scratch my head. So I thought I’d clarify things for your readers.

A lot of professional traders and financial analysts purposefully use industry jargon to make you feel dumber and themselves appear smarter. I try never to do that. I want my subscribers to understand everything we’re doing and the rationale behind every trade we make. At the end of it all, I want them to be able to make these trades for themselves.

I think I may have written ‘long-term hedge’ back in October when I was writing a stack of new reports ahead of launching Alpha Wave Trader. I’m not sure how I let that one slip through. It doesn’t really make much sense!

Far better to replace that phrase with something like, “We get a signal very quickly to enter and exit a position”. That’s a lot easier to understand. And a lot closer to the mark.

The fact is my approach isn’t rocket science. It’s the result of decades of market observation. I have tried a million different approaches and have finally settled on a couple that work. Your trading method doesn’t have to be complicated to work, but it does have to reflect actual price action.

In the end you need something that can be defined without any grey areas. Your entry rules, stop loss rules and targets must be clearly defined prior to entry. The calculations made must be repeatable and the strategy should work across different time frames.

The basis of my claims from a technical perspective is that traders will continue to make the same mistakes over and over and my method capitalises on those mistakes.

Cheers

Murray

I must admit I scratched my head over that ‘long-term hedge’ bit as well. Maybe you did too.

While Murray works hard to avoid jargon and explain his methods in terms we can all understand, there’s no getting away from the fact that aspects of technical trading are, well, technical.

That’s why Murray does regular video updates atop his essays and regular trade alerts. It’s a lot easier for him to describe his theory of price action by showing you his charts and talking you through them directly.

He shares some of these videos with readers of our free e-letter, Money Morning, each Monday. You can access these on YouTube here.

A number of those videos detail Murray’s view of the markets over the past few months. If you’re on the fence about whether Alpha Wave Trader is the right service for you, these are well worth checking out.

If you’re already considering joining Murray and receiving his next ‘slingshot’ trade recommendations, go here for further details.

Now let’s have a look at the markets…

Markets

Overnight, the Dow Jones Industrial Average closed down 32.14 points, or 0.13%.

The S&P 500 fell 13.09 points, or 0.46%.

In Europe, the Euro Stoxx 50 index finished up 2.51 points, or 0.08%. Meanwhile, the FTSE 100 dropped 0.03%, and Germany’s DAX closed flat…down 0.44 points, or 0.00%.

In Asian markets, Japan’s Nikkei 225 is down 328.79 points, or 1.54%. China’s CSI 300 is up 0.02%.

In Australia, the S&P/ASX 200 is up 22.33 points, or 0.36%.

On the commodities markets, West Texas Intermediate crude oil is US$59.29 per barrel. Brent crude is US$67.83 per barrel.  

Turning to gold, the yellow metal is trading for US$1,309.61 (AU$1,849.21) per troy ounce. Silver is US$15.28 (AU$21.58) per troy ounce.

One bitcoin is worth US$4,019.99.

(Is bitcoin’s move above US$4,000 a sign it’s about to run far higher, as some crypto bulls predict? You can stay atop all the latest crypto investing advice here.)

The Aussie dollar is worth 70.82 US cents.

The ‘grand prize’ for coal

Moving on…Australia’s increasingly maligned coal industry is under fire from the left fringe once more.

If you’re a Greens voter, you may want to cover your ears. Or avert your eyes.

Not that there’s anything wrong with supporting a clean, healthy environment. Quite the contrary.

But we have to be realistic in how we achieve it. Move in the right direction rather than attempt to teleport there.

To get an idea of how not to go about it, just look at the Green New Deal fiasco in the US.

Abandoning jet travel for high speed solar powered rail and hamburgers for soy burgers may sound appealing to vocal fringe groups. But as witnessed in the US Senate on Tuesday, not a single Senator voted in favour of the Green New Deal. 57 senators rejected it, seeing it go down 57–0.

Independent Senator Angus King of Maine said he supports ‘ambitious goals to protect our planet for future generations.’ But he nicely summed up why he voted against the Green New Deal, adding, ‘I believe that the best way to fully address this challenge is to set realistic goals.’

Realistic goals. Right…

Someone may want to forward that bit to Australia’s Greens party.

Cast your mind back to November 2018, and you may recall Greens MP Adam Bandt saying his party’s policy would make it illegal to dig, burn or ship thermal coal from 2030.

This may be stretching his intent, but on the surface it sounds like you could face seven years in jail for firing up your old charcoal barbie.

On Thursday, the Greens were back at it. The party released a new climate policy which sets 2030 as the year for Australia to be running on 100% renewable energy.

Green Leader Richard Di Natale said the mining and burning of coal remained the single biggest cause of climate change in Australia and around the world.

That may be so.

But there’s more than one fly in this proposal.

First, the economic hit to Australia would be tremendous. In 2017–18 coal (thermal and coking) regained its crown as the nation’s top export earner, bringing in $56.5 billion in 2017, according to the Australian Bureau of Statistics.

Second, global coal demand — as yet — remains stable, if not growing. And supersized nations like India and China continue to build new coal-fired plants.

Third, coal doesn’t burn itself. People burn coal. And raise cattle and fly in planes and…well…you get the idea. And the UN estimates the world will grow from 7.7 billion today (up from 1.6 billion in 1900) to a whopping 9.8 billion by 2050. Or 2.1 billion more people in only 30 years.

To put that into some kind of perspective, that’s like adding 88 Australias to the world by 2050. With most of that growth coming in developing nations that are likely to remain reliant on…coal.

Today the world burns around eight billion tons of coal per year. Just over one ton per person every year. If demand remains stable that would grow to some 10 billion tons per year by 2050.

Now that figure may well be lower as renewables and other energy sources come into greater play. But if it’s not, does that mean the world is doomed drown in boiling, rising seas?

Hardly.

Carbon capture has gotten a lot of negative media due to the costs and inefficiencies in early systems. But the technology is there. And it will only take a few big breakthroughs to see it widely deployed.

According to Peabody Energy’s Glenn Kellow, carbon capture and emissions storage is the ‘grand prize’ the industry is intent on grabbing hold of.

From the Australian Financial Review:

“The technology exists today, though it is only through learning by doing that we optimise project costs to deploy at scale… In addition, there are transformational technologies in the innovation pipeline that promise to reduce costs even further with continued research and development.”

Kellow noted renewed enthusiasm for CCS in the US in the wake of the introduction of a Trump-endorsed tax break called 45Q. It creates a tradeable tax credit for carbon captured and stored or transformed. The scheme… has already inspired Occidental Petroleum to invest in a carbon capture project and there is said to be a gathering host of projects on the drawing boards awaiting clarification from the US Internal Revenue Service on how 45Q will be administered.

The way Kellow sees it, whether coal demand may or may not have peaked doesn’t matter that much for the moment. The demand pie is huge and the world will continue to need mines, trains and ships to meet its needs.

The truth is, nobody knows what the world’s energy mix will look like by 2030. That’s what keeps life interesting.

But if carbon capture technology makes a few key advancements, nations that have spent billions on transitioning to solar and wind power — not to mention abandoning their $60 billion annual export cash cow — are going to look rather silly.

Let us know what you think about the push for 100% renewables and abandoning thermal coal. Are you comfortable investing in coal miners? Just send your letter to letters@portphillipinsider.com.au.

Finally, here’s the latest in politics from The Australian Tribune:

‘Brexit Roulette — Eight Options All Shot Down’

Maybe they were given too many choices.

After all, you wouldn’t expect a group of children staring through the glass at eight different flavours of ice cream to reach consensus on a single dessert choice, would you?

So it should come as little surprise that…’

If you’re fed up with sanitised, politically correct dogma cut and pasted from one mainstream source to another then The Australian Tribune is for you.

And it’s absolutely free.

Sign up here to get The Australian Tribune delivered free to your inbox five days per week.

You can visit our website at https://www.theaustraliantribune.com.au/ to read the complete article above now.

Cheers,
Bernd