Friday, June 24, 2011

Barack H. Obama The Trader-in-Chief

From Fast Money:
With US crude prices already down 16 percent from their April high, pundits and politicians everywhere were asking Thursday: "Why would President Obama tap the Strategic Petroleum Reserve when oil prices were already falling?”

The answer is simple: Obama knew this would have the maximum impact, hitting speculators on the chin, according to traders.

“Arguably the timing of the release is genius,” said Stephen Weiss of Short Hills Capital. “If the SPR had been released as crude worked higher, the effect would have been relatively momentary, but releasing it now, with the momentum on crude prices turning down, will add to the price decline as speculators hit their stops and margin limits more quickly forcing them to sell.”

Prices for WTI oil [CLCV1  91.14    0.12  (+0.13%)   ], the benchmark for the U.S., plunged as much as five percent on Thursday after the Department of Energy and the International Energy Agency announced a coordinated release of 60 million barrels from so-called emergency stockpiles. 

“This is analogous to shorting a momentum stock,” added Weiss, a veteran trader who at one time co-managed Steve Cohen’s legendary SAC Capital. “Astute investors don’t short momentum stocks as they climb purely on valuation because the market can stay irrational longer than an investor can stay solvent. However, once the momentum breaks and fundamental reality sets in, the shorts go after the equity like bees to honey.”...MORE
...If there’s any lesson here, it pays to trade alongside President Obama. Back in March 2009, Obama made an unusual remark for a sitting President, saying that equities were a good deal based on earnings valuation. The bull market would begin that month.