"Michael is a gifted trading mentor. Over the course of several initial conversations he was able to assess my situation and recommend trading strategies that were harmonious with my personality; while at the same time attending to my family’s financial needs. I cannot stress enough how life changing this was for me." --JC, Kansas


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Book Reviews

"This is a great book for novice and experienced traders. Soaking up its wisdom distilled from experience and introspection will help you become more successful. And that's true even if it doesn't make you a penny." --Aaron Brown, AQR

Richard Sandor

The World Federation of Exchanges (WFE) announced today that the recipient of the WFE Award for Excellence this year will be Dr. Richard Sandor, chairman and CEO of Environmental Financial Products LLC (EFP). Dr. Sandor was selected for this Award in recognition of his work at the epicenter of environmental and financial markets for more than four decades.

“In 1992, Dr. Sandor was honored by the City of Chicago for his contribution to the creation of financial futures and his recognition as the ‘father of financial futures.'”

“The WFE chose to honor Dr. Richard Sandor with the WFE Award for Excellence for his momentous innovations in financial futures and environmental financial products,” said Hüseyin Erkan, Secretary General of the WFE. “The work he completed at the Chicago Board of Trade forty years ago was a turning point in the financial world. Dr. Sandor’s contributions to the financial and environmental markets have been instrumental in the development of the industry.”

It seems the WFE is just catching up with what you and I have known about Doc for a while.

Doc and I did a podcast back on June 13 regarding his new book Good Derivatives.

I wrote Richard Sandor: A Legend In Financial Innovation in April 24 for Huffington Post.

And here is a video I did with him in May of 2011 at the Milken Institute’s Global Conference.

We should be thankful for all he’s done for our industry when you consider the likes of Jon Corzine (MF Global), Phillip Bennett (Refco), and Russell Wasendorf (PFG Best). He’s someone that anyone in the commodities space can look up to with great pride and admiration and want to emulate. I know I do.

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My new app Trader Trivia was mentioned in Barron’s this weekend.

From Barron’s:

IF ANTHROPOLOGISTS DESCENDED on Wall Street, they would find a culture both distinct and exotic. The Street has its own way of thinking, its own social hierarchy and rituals, and an arcane language indecipherable to many outsiders.

Michael Martin, a trader, is part of this culture. He also has an outsider’s eye. He wrote a book (The Inner Voice of Trading), created a blog (MartinKronicle), and now has designed a game (Trader Trivia), just released on Apple’s iTunes store for iPhones and iPads.

“If you’re out socializing with traders, they are engaged in conversations that include movie quotes, heroic trades, historic moves, and market data. All of that is part of our culture as investment pros,” Martin says.

Those seeking to tap into that culture can do so by downloading Martin’s game. They can test their knowledge on questions such as, What is the benefit of owning a call? And, who wrote Extraordinary Popular Delusions and the Madness of Crowds?

Martin filled his game with what he says is the stuff of daily dialogue about trading that can’t be turned into actionable investment ideas. He sells himself short on that point. All good investors know to look to the past to better understand the present and the future. Martin’s game provides an amusing assist.

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More money has been lost reaching for yield than at the point of a gun.” — Raymond Devoe

With financial repression in full gear, investors desperate for yield are paying up for assets with no regard for risk.

Pay 178 dollars for 100 dollars in bonds (78% premium to NAV) and you are going to lose money. Pay 178 dollars for 100 dollars in LEVERAGED bond portfolio and you are going to get killed. As many closed end fund investors have learned over the past three days, as the premiums to NAV have collapsed from the high 70’s to the high 30’s.




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Total Run Time 14 minutes.

Frank Clements is a longtime friend of mine. He has spent 24 years trading, mostly on the floor of the NYMEX in Natural Gas. The last few years he’s been a partner of Meridian Energy Brokers with my other good friend Barry McAuley.

In this podcasts, we speak about the week it was in WTI Crude Oil (CL) and Natural Gas (NG). We briefly mention my interview with T. Boone Pickens at the Milken Institute’s Global Conference in May of this year (below).

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Podcast Length: 31 minutes

Today I spoke with my good friend John Del Vecchio about his new book What’s Behind The Numbers: A Guide To Exposing Financial Chicanery & Avoiding Huge Losses In Your Portfolio.

Although John runs the Active Bear ETF (Ticker: HDGE), this book is not really about short selling. Long-only investors will benefit greatly from John’s insights and especially how to get out of their losers quickly just by following a few simple fundamentals on the balance sheet and income statement.

One of John’s most impressive skills is that he spends his days as a forensic accountant looking for the chicanery that is a lot more prevalent that you may care to believe. Then there’s the fact that he’s a short seller in the face of QE “infinity”, but that’s besides the point.

One of his biggest shorts (below) is Green Mountain Coffee Roasters (Ticker: GMCR). They are offering big discounts to generate revenue and as we mention in the podcast, that’s robbing Peter to pay Paul. As he states, “eventually there will be an earnings shortfall, like there always is with companies like this, and the stock will tank.”

Green Mountain Coffee Roasters

Green Mountain Coffee Roasters, Weekly Prices

The WSJ just ran a story a few days ago called Coffee Standoff Tests Growers’ Grit that discussed Brazil’s coffee producers hoarding physical until prices rise.

If coffee prices rise, and GMCR is offering discounts, they are going to have their top line revenue growth squeezed in a vice, especially if they don’t hedge by purchasing coffee futures contracts to offset higher prices. You can’t pass on higher costs to the clients in this regard and concurrently offer them discounts.

GMCR had this to say about their basis risk in their most recent 10-Q: “At June 23, 2012, we are exposed to approximately $73.5 million in un-hedged green coffee purchase commitments that do not have a fixed price as compared to $119.9 million in un-hedged green coffee purchase commitments that did not have a fixed price at September 24, 2011. A hypothetical 10% movement in the “C” price would increase or decrease our financial commitment for these purchase commitments outstanding at June 23, 2012 by approximately $7.4 million.”

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