HardAssetsInvestor

Mike Norman (Norman): Hey everybody, welcome back to HardAssetsInvestor.com. I’m Mike Norman, your host, here for the second part of my interview with Kevin Kerr. So Kevin, in the last interview, you're kind of cautious now, the first time since … I’ve known you for a long time. And I know that back in 2001-2002, and all the way up until probably very recently, you were very bullish on commodities. Commodities, that’s your business. You're involved in that. You run several funds. How are you playing it, then, if you're turning more cautious?

Kevin Kerr, president, CEO, Kerr Trading International (Kerr): That’s the word: cautious. We’re not necessarily overly bearish.

We’re not getting short all these commodities. However, there may be opportunities in many of these commodities to be short. You have to be very particular though. I think what we’re saying here is that a lot of these commodities have had incredible runs. Technical people would say this stuff’s got a lot further to go, and it may.

But if you look at the fundamentals, there’s just not a lot of fundamentals supporting some of these price levels and some of these key commodities. The way we play it is we’re going to look for pullbacks in some of the major commodities and buy in at cheaper levels. Not up here. Now, some commodities we’re adding to occasionally … gold, you know, to take into the fear aspect right now of what’s going on in the Middle East.

Norman: What about this recent pullback in gold? How do you view that?

Kerr: Well, this was the pullback we were waiting for. I was actually expecting it to go back below $1,300. But it was still a very good value on some of the options. So, we’ll enter the trade. It doesn’t matter if it’s $30 or $40 difference, really, to us. We didn’t get that pullback below $1,300. But I still think we could see it. We’re just adding in value levels that we see. And we’ll continue to do that on all the commodities as they pull back.

Norman: Now, you talked about macroeconomic factors previously that you thought could create some head winds. I recently had Bart Chilton on as a guest. He’s one of the commissioners at the CFTC. And now, the CFTC’s imposing some new regulatory measures, position limits, etc., as mandated by the Dodd-Frank Act of FinReg. He says that that’s also a new element for the markets, which should calm down some of the speculation, bring down some of the volatility. Do you agree with that?

Kerr: I do, to some extent. I think that the exchanges raising margins and the position limits are all things that they're doing prudently. And I think they’ve done a fairly good job of it. The reality, though, is on position limits, that traders now are global. They can go elsewhere and add to their position. They can go to Asia. They can go to Europe. They can go wherever they need to go to add the positions.