Recently we got the opportunity to sit down with Mr. James Mound, the head analyst for Mound Trade Signals and author of the book 7 Secrets Every Commodity Trader Needs to Know, for a one-on-one interview. Mr. Mound’s 2010 Mega Commodities Forecast was released on January 5th and with it came scores of comments about his dramatic market predictions. In this interview we will look to ask the pressing questions about Mr. Mound and his forecasts. Please enjoy, feel free to comment, and check out his 2010 Mega Commodities Forecast here.
Trader's Blog: James, thanks for sitting down with me today, and if you don't mind I'd like to jump right in. On January 5th, in your 2010 Commodities Forecast, you said:
“I see a lot of signals pointing at a few weeks of bullish commodities here in the first month or so of the year…. This could be enough to get oil on a two to three week bull run to set the high for the year…. This is when I recommend jumping short.”
What made you call the top with such specific timing and where is it going from here?
James Mound, Mound Trade Signals: First, thanks for having me here today. The underlying factor in oil prices heading into the beginning of 2010 was the surprising cold weather. A big misunderstanding amongst a number of traders is that big snow storms should cause a price spike based on a short term increase in demand. In my opinion, this likely causes a drop in demand as standard modes of transportation like air and land travel can come to a virtual stop and cause usage to plunge. The main weather issue during the winter is sustained lower than average temperatures, and in January this hit hard both in northern and southern states as well as parts of Europe and China. Price support was apparent but traders needed to look at two things. First, the cold snap was just temporary and, even though cold weather has sustained itself longer than many expected, the market has likely peaked on a buy-the-hype, sell-the-news reaction. Second, the dollar is moving a lot of markets with its recent price surge and oil demand globally is going to be hampered by not only global economic concerns, but also foreign currency weakness.
TB: Many readers of your free weekly report, The Weekend Commodities Review (WCR), are quite familiar with your bold forecast that the U.S. dollar index will hit 86 before it hits 70. What made you back that forecast with the promise to quit writing the WCR report forever if you are wrong?
JM: I remember when I first started my career in the business I used to listen to the squawk box in the morning for opening market calls from the pit. Every morning the coffee guy would get on the box and say something like:
"Today I expect 1-2 higher on follow through buying from yesterday’s rally with short covering from overexposed shorts. However, a flat opening is possible on hedge fund selling to lock in the current high prices. And if the weather forecast turns when the 9am report comes out we could see 1-2 lower."
I remember thinking, how could this guy get paid to take absolutely no stance whatsoever? So I started writing a weekly forecast and if my analysis led me to believe the S&P500 was going to rally 5% this week or cocoa was going to plunge 300 points then I would make the call; right or wrong, I just thought someone needs to have some stones. 20,000 subscribers and almost a decade later I would like to think my willingness to call’em like I see’em still comes through in my report. When I looked over the dollar market in 2009 I saw the potential for a unique opportunity to play such a strong long term forecast that I wanted to find a way to express my convictions above and beyond my typical forecasts, so I decided - let me put my career where my mouth is. Trust me, the last thing I want is to stop writing the WCR, but I think my readership appreciates my willingness to stand behind my forecast.
TB: I think it is a rare thing to see amongst analysts these days. So the dollar made a big move in January and early February, just like you called it. Why did it move and what is next for the dollar and commodity prices?
JM: Well if you think January was a big move then buckle up for the rest of 2010! Currencies can be tricky because they tend to have a ton of fundamental components as opposed to, let’s say, corn for example – something that is heavily dependent on weather and planting cycles. However, the dollar is very exposed to what is happening across the pond. The euro represents 54.9% of the U.S. dollar index’s composition. The euro has a fundamental flaw that has been revealed over the past 18 months. When individual economies go awry, their country’s monetary policy can help bail them out of the jam by controlling rates, printing money, changing lending habits and so on. However, the euro currency limits the countries that comprise its ability to execute individual monetary policy. Think about it in terms of the Federal Reserve here in the states. They have a very difficult job to get ahead of the economic curve, and they often stumble and cause both small and large recessionary cycles. Now imagine doing that for 16 countries all with different economic issues and status – all at one single policy! As these countries cope with individual economic problems I believe the market is seeing a walkout on the currency. Keep in mind this is a currency that basically ran from 84 in mid-2001 to nearly 160 in 2008. I think a 50% retracement is in order and the U.S. will be the main beneficiary. Unfortunately, this spells disaster for commodity prices.
TB: This disaster you see happening, when and how do you think this is going to unfold?
JM: I feel strongly that 2010 will be an epic year in both stock and commodity markets. I wrote the 2010 forecast in January and I am following up with an update report to be released March 9th. I also traveled to Vietnam, the world’s 2nd largest coffee producing country, and I sent some of my research militia to the front lines down in Brazil (#1 producer in the world). What I uncovered made me put together a report dedicated to the opportunities in the coffee market in 2010.
TB: Sounds like your subscribers are really getting their money’s worth!
JM: Yes they're doing pretty darn well!
TB: Well thanks again for giving us some insight, I know our readers are going to have more questions so be ready for a lot of comments when I post this on the blog! And I'll also hyperlink on the blog where readers can check out your 2010 Mega Commodities Forecast.
JM: Thanks, I look forward to the comments and welcoming new partners.
From all of the team here at the Trader's Blog we would like to thank Mr. Mound for taking the time today to talk about the markets and his forecasts.
Disclaimer: Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not indicative of future results.