WSW Friday, June 12, 2009

Daily Notes

18 June 2009

Added some aluminums ( AA and NHYDY – I chose AA over KALU for the “highly rational reason” that could buy a “round lot of 100 shares” of AA, but not of KALU, with the cash I had on hand… sometimes trading is a bit, er, silly… Also on the buy list: I finally “bought the farm” with a “sweep:” of HOGS, FEED, and CVGW (that was already well into a run and I bought in late. Oh well, can’t always have discipline… ) and I was bought back into RCL and CCL as they turned up. (“Buy if touched” or what I like to think of as “trap in buys” are your friend… For some inexplicable reason Schwab calls this “buy stop orders”. Basically, you put a “buy if the prices rises up to or past the price” then ratchet it down each day as a stock drops – lurking just out of a days range above. When a breakout happens, you get automagically bought in.)

My “holdings” posting is updated with the full details including any minor changes.

17 June 2009

Today I bought some PBRA (the preferred shares of PBR) along with QCOM, QQQQ via the leveraged with options trader tool of QLD, and a few other more speculative things (like SYMX and CPST Capstone Turbine). Along with the speculatives, I added some conservatives / cautionary positions. HE Hawaiian Electric, VOD Vodaphone. Somewhat in the middle, TKC TurkCell the Turkish cell phone provider) and GME Gamestop. I also added to my JJG grains position ( I had dropped to a “tiny” and now have about “a half” position ) on a reasonable entry call with an upside day.

This, being a Wednesday, was an “oil inventory report” day. Oils tend to be low going into the report (if they are not, be concerned…). Once that report is out of the way, they tend to rise. This Friday is options expiration. The oils might rise into the expiration, or they might stay flat. If they stay flat, the oil trade will run until the following Friday.

There was also an “entry” call on EWZ. Even though the market looks ‘toppy’, I continue to trade via the entry tool until a change of trend is established as a fact.

Why? Because things don’t just turn around in a day. They go from rising to “rolling sideways” to “trending down with up days” to “trending down stair steps” of flat, down, flat, down. So I tighten my time scale and trade the ripples until the trend reversal is confirmed or falsified. In either case, I’m on the right side of the trend when it resolves.

So I bought some EWZ on a rolling trade basis even though the longer term bull run is getting old and may be a bit “toppy”. If the trade goes against me (becomes a busted trade) I’m out a couple of percent and it’s no big. This is the problem of an old trend. Deciding when to get off the ride (that may still have a lot of upside potential) and when to stay on (when it might fall out from under you as far as it came).

My solution is to tighten up my timing. I get in on the “up call” BUT I’m ready to get back off it Real Fast if it turns into a Crazy Ivan. I also move my trades more to market or sector ETF baskets and less in individual stocks where the volatility can be greater and the ability to exit a large position can be ‘harder’ for a thinly traded stock. (i.e. if daily volume is 10,000 shares and you want to dump 5,000 shares; well you will NOT be getting the quoted “buy” or “bid” price… The first 100 will “go off” at the bid quote, the rest will be at ever lower prices…

And today, from the “Ministry Of Stupidity Speaks” department, we had a speech by Pres. Obama about redoing all of the financial regulatory system. Financials obliged by selling off (nearly 3% for the XLF basket). This is not a slam on Obama. ANY government weenee speaks, it will not be good for stocks, and worst for whatever sector they talk about.

Remember that on any stock or ticker I say I’m looking at, you don’t just go buy it. You wait for a stock entry indication to get the best possible entry into the position.

India is a good example. After it spiked up on the election results, I’ve been talking about how I like it. I still haven’t bought a bunch more because I’m waiting for “an entry”. IIF is DOWN from $24 and touched $19.50 early today (bouncing rapidly back over $21 as I type). The indicators are looking a lot like an entry (though a bit more touchy due to this being options expiration). Now if you bought it at $24 it would have been very hard to ride it down 20% and feel good about it. If you caught it at $19.50 and rode it up to $21.10 at the close, you would be feeling a whole lot better. And that is why you don’t just go buy something either because I own it (it may be nearer and exit than an entry) or because I like it ( I may be waiting for an entry).

Another good example is MOO and NIB (ag inputs basket and cocoa) both of which I’ve said below I might buy. That means I’m still waiting for a proper “entry”. MOO was down 3.5% today and NIB was off 4% at $39.25. So I’ve not bought any yet, I’m still waiting for a clean entry. For NIB, I’m guessing that’s about $37 to $38 as it is rolling sideways.

MOO has started a “Crazy Ivan” plummet off a cliff (3 very hard down days in a row – indicating to me that short sellers are hitting it hard) so I’m going to step away from the idea of buying MOO until it stabilizes. A moment to ignore Slow Stochastic and Williams %R as entry indicators, since the ticker is WAY high, punched through the moving averages to the downside, and has the sharp “off a cliff from the top” look of a broken trend. Oh, and DMI has “red on top”… After that, I heard on the news that the lousy weather was causing a reduction in purchases of fertilizer and other inputs (probably why the shorts were hitting the constituent stocks – POT, MOS, MON, etc. POT was off 10% today… entry soon?)

If I’d just jumped on the rising trend line when it was well above the moving averages, I’d be screaming from the plummet and it is very hard to not “hold on in hope” too long then sell out in desperation at just the wrong too low point. But I saw the “bounce of $38 twice” “failure to advance” and decided it was toppy, but might be a reasonable tradable trend IFF I got a good entry call. Instead I got a cliff, so just walk away…

Another good example is the aluminum trade. I still haven’t made a buy. AA Alcoa has been down 4 days in a row (-3.78% today). Getting close to a good entry in the next day or two as it hits the moving average stack at about $10 / share (and maybe as low as $9). It ought to ‘print’ more or less flat for a couple of days, so I’m not in a hurry. But I’m not walking away from aluminum either. Just waiting… (NHYDY Norsk Hydro was down 5.98% today, but KALU was UP by 1.46% – a nice “tell” as to which might be better…)

In summary: WAIT for a clean entry call via the method in the link. One of the hardest things to do. If you make a bad entry and it goes against you, you need to do a “work out”. That can either be a rapid exit (“the first loss is the best loss”) or a double down at the proper entry call when it DOES come (so you only need a 50% retracement to ‘exit whole’).

I had trading in options expiration week. So many moving parts, so much money shoving things around, so many whales breaching and blowing…

16 June 2009

When is the 3rd Friday of the month? Oh, THIS Friday.
When do options expire? Oh, 3rd Friday of the month.
When does an early month run up on “new money” (from mutual funds and 401K plan funding entering the market at the end of each month) “Revert to the Mean”? Often times, at Options Expiration.
Where is the “mean”? Oh, below the present prices in the middle of the Simple Moving Average stack.

Not a 100% guarantee, but most often at options expiration you get a reversion to the mean. At that point, look to the next longest time scale to see if we are “toppy” or just having a “dip” in a trend.

So we can likely expect this “sideways down” until Friday as the market moves back to the moving averages. I’m a little bit worried about the “failure to advance” with two peaks up to about the same price on a few tickers. We’re also into the Summer Doldrums where upward velocity often runs out. What to do?

I’ve sold many positions and I’m trying to decide if this is a “dip” to buy in, or a ‘top’ to sell out (mostly just holding high dividend payers, some oils, and a chunk of Out Of The U.S. growth with value). Expect that if this is just a “dip”, Friday or next Monday are likely to be really good entry points. If it’s a “top”, then we will find out when the following run up peak fails to reach the prior height. (Failure to Advance). So keep your powder dry and wait for the “how to make an entry” criteria.

The market This Week

WSW – Friday, June 12, 2009

Say you wanted to double your money in 6 years? What rate of return would you need?

There is a simple and interesting way to calculate this, called the “Rule of 72”. You can take 72 and divided it by the rate of return to find the number of years it would take to double at that rate.

This rule can be turned around to divide 72 by the years to find out the rate required to double in that time. So divide 72 by 6 and you get 12%.

Are there any reasonably secure investments that yield 12%?

The answer is yes. Now the rule of 72 expects you to be able to re-invest that yield at that rate, which may not be available to you if you buy a high dividend stock and it runs up (lowering the effective dividend for new buys), but on the other hand, as folks realize the yield exists, the stock often runs up giving you that internal rate of return much faster than just accumulating and reinvesting the dividends.

Since the stock market has gone fairly flat at this entry into The Summer Doldrums, I’m now starting to focus more in high yield rather than on Rocket Ride trades which are harder to find after a run like we’ve had and especially so as we head into the doldrums.

So this posting will be a bit different than the prior ones. Yes, the usual stuff will be down below, with less commentary; but up here at the top will be a few ideas of things that could give a double inside 6 years largely due to the dividend.

First up are the “Oil Trusts”. These must, by virtue of the laws governing “trusts” pay out most of their gains. There are 2 important differences to keep in mind. A US Trust can not reinvest a bunch in their growth. They are essentially “closed end”. When the oil is pumped out, they are done. Canadian trusts can keep adding to their reserves and growing. But Canada put a 15% tax on dividends paid out, so that big dividend must be “mentally reduced” by that 15% of the dividend tax to know what you will really get.

OK, my favorites (which may not be the best choices, just ones I’m familiar with and like): LINE, PGH, PWE. The last two are Canadian.

LINE has a 12.5% dividend
PGH has a 12.0% dividend
PWE has an 11.16% dividend but holds a lot of natural gas that is presently very depressed in price and likely to rise more in coming years. These trusts pay dividends monthly, so it’s a great income generator on a consistent basis.

Next up is cell phones. Here I like CEL the Israeli cell phone company with a 12.69% dividend. It does business in the Shekel which is a stronger currency than the US Dollar. There is the risk that a terrorist will nuke Israel and the whole things goes POOF, so I would not put more than about 5% of my portfolio into it, but the odds of that are pretty low. VOD Vodaphone is at 8.6% which doesn’t reach our goal, but isn’t too bad for a growing company.

There are also a variety of funds that pay out a large percentage. Here you must make a distinction between those that pay out at the end of the year and those that pay monthly or quarterly. IAF and EWA are both Australia funds. IAF pays quarterly. EWA pays out in December only (so you hope that next December is the same payment as last december. On the other hand, you can hold IAF for 3/4 of the year, then swap to EWA and double dip just a little… IAF is presently paying 10.7% while EWA is expected to pay 10% per BigCharts or 7% per Yahoo next December based on what they did last year. So maybe it needs a bit more research. You get the big dividend along with any dollar depreciation along with the China Resource play (buy what China buys) along with the present rise in mining companies. A nice package!

TGP is a natural gas tanker company. They enter 30 year leases on their ships, so it is more like a pipeline than an oil tanker. The price tends to move with oil tankers for no good reason, but right now it has a 11.7% Dividend. The other gas pipeline companies are also good candidates for high dividends. DPM is at 11.5% while XTEX is at 25% that makes me wonder if something is wrong (sometimes those mean a double is coming soon, sometimes it means that they sold gas at $10 a unit under contract and the contract was renewed at $3 so you get 1/3 that much next time…)

Finally, there are REITS. With real estate presently under stress, I would not put a lot of money here, but certainly some. There is a zoo of different kinds of REITS. Storage units, industrial, offices, apartments, China, malls, hospitals, you name it. My favorites are:

RPT a mall REIT 8.9%
PLD a “logistics” REIT with warehouses around the world 6.6%
PEI another mall REIT, but a bit more speculative 6.6%
PCL Plum Creek Timber – a “lumber” REIT that ought to have a rising dividend at the market for housing recovers and lumber prices rise. Presently paying 4.9%

But none of these are 12% !!

Yes, but their prior payout was. So one can expect that as their business recovers they will resume that payout (required to be a REIT). The only question is will folks return to the mall, buy stuff, and build homes. If you don’t think THAT will happen in the next few years, we’re in big trouble! So I’d take a “tiny” here and work my way in as recovery becomes more assured (and as the need to refinance or raise capital is shown to be less of an issue.)

As the week unfolds, I’ll be adding some more high yielders here as time permits. I have large positions in IAF, PGH, PWE and smaller positions in CEL, RPT, PEI, and TGP.

In particular, there are large dividends with potential recovery / growth in the shippers.

OOTUS (Out Of The U.S.) is still working. See the racing stocks tab for currencies and for foreign emerging stock markets for the latest moves (which shows India on top as I type this).

The Brazilian Real, The Aussie Dollar, and the Great British Pound all were winners on the week. That’s a clue as to where money is flowing. Follow the flow… We also have (not on the chart) the Israel Fund ISL rising nicely. So India (IIF, IFN, EPI), Israel ISL, Australia (EWA or IAF), Brazil (EWZ) are all rising nicely right now. And Great Britain has just joined the parade with a just under 5% dividend too.

For now, take a look at this chart of VIX – the Volatility Index. Volatility goes “way high” in a crash. We have returned to near normal volatility.

VIX  - Volatility Index (not a ticker, you can't trade it)
VXX - Short term VIX futures ETN (a ticker you can trade)
VXZ - Medium term VIX futures ETN (a ticker you can trade)
FXY  Japanese Yen
SH  "Short" sell of SPY
SPY  S&P 500 benchmark

So this says you can expect fairly slow changes of direction from the market, but with a slight upward bias. (You could still have a dropout for a week or so – a trend does not eliminate the wobbles.)

Dollar Trade -Down - getting old

Dollar Trade -Down - getting old

Here we can see the “dollar down” trade is getting old. Don’t expect much action in the dollar for a while. The dominant trend is still “dollar down” but we will start having shallow stair steps. Flat a while, down a bit, flat some more. There might even be a couple of blips up from time to time as Central Banks around the world and the Fed intervene in the market.

Ideas of the Week

If you would like a peak ahead at what I’m evaluating this weekend it is stuff like oil services and some tech. Cell phones, pda’s, that kind of stuff. What all that lithium, copper, etc. gets turned into for sale. AAPL is ripping, but I “have history” with them that makes it hard for me to be objective. PALM is on a rocket ride, but you need to evaluate it carefully, it’s gone up a lot already. I’ll probably stay with the QQQQ basket as a less emotional vehicle for me. PALM is moving based on an introduction of a new phone with S Sprint / Nextel. Expect the run to end on the actual shipment (soon).

CZZ is continuing its rocket ride. I still hold a bunch (my trade rules required me to sell some since I had a double in it, but I’m still holding a large chunk). The techs are running and probably will for a while.

PALM, RIMM, AAPL probably better to do a “sweep” of all three with small positions rather than try to pick the winner. Add some QCOM Qualcomm who own patents on a lot of he basic cell phone technology and you have a nice position in all those “talking stones” we seem to buy new each year…

Hog Wild in China?

Hog Wild in China?

CVGW  Calavo Growers - Calif.  Avocados and veg.
MLP   Maui Land & Pineapple - with a tourism kicker... 

CGLA  Cagle’s Inc - Atlanta Georgia - Chickens and feed
CALM  Cal-Maine Foods - Eggs
SAFM  Sanderson Farms - Mississippi Chickens & Poultry
PGPDQ Pilgrim’s Pride in bancruptcy (trailing Q on ticker)

HOGS  Zhongpin Inc, - Chineese hog farms
FEED  Agfeed Industries - Chineese hog farms & hog feed
SFD   Smithfield - Huge intl. meat & hog producer
HRL   Hormel - Spam spam spam spam ... and a whole lot more

SPY   S & P 500 baseline

FEED has a ‘technical sell’ signal from the RSI and MACD, but in a high growth stock that usually just means they will wobble sideways for a week until the next rocket up. China, speculative, maybe 2% of a portfolio… MOO (not on the chart) the Ag Inputs fund is starting to resume its run upward. I’ll be buying back in on Monday, I think. SAFM and CVGW both look interesting for small positions too as US farms.

What does the 10 day hourly chart say is happening now?

The charts on this posting are very large. On a Mac with Safari, “CTRL” and a mouse click lets you open them in another window for better viewing. Other browsers, YMMV…

Here’s a 10 day houly chart of the Dow 30 Industrials (DIA), the S&P 500 (SPY), the Nasdaq tech companies (QQQQ), the Russel 2000 (RUT), and both a Brazil fund (EWZ) and an Australia fund (EWA). It also has a ‘short fund’ (SH) on the chart so you can see what being short this market is doing right now. We also have EWO, an emerging Europe Austria fund, EWW for Mexico and IIF for India.

10 Day Hourly Interval Broad Market

10 Day Hourly Interval Broad Market

This is a live chart, so my comments will describe how it is now, but in a week it will be showing new data and a new week. Since I think it’s more important to be in touch with what the market is doing NOW than to preserve the historical chart, this is, IMHO, a reasonble choice. Just don’t be surprised if the chart I describe is not the one you see a few weeks from now!

We see that the U.S. market is in a flat wobble. No need to be there. Several other markets have joined the flattening. Only India and Australia up on the week. Other than the drop at the opening on Monday, the week was flat (measured from the close Friday).

India has elected a pro-business government and is running up. Britain has also elected a pro-business government and is now in play.

Other Asset Classes

The 10 day hourly asset class race:

10 Day Hourly Interval Asset Class Race

10 Day Hourly Interval Asset Class Race

SPY  S & P 500 US stocks
GLD  Gold
EEM  Emerging Markets
FXY  Japanese Yen
JJC  Copper
SHY  Short term bonds 1-3 year
USO  U.S. Oil
DBA  Agricultural basket
SLV  Silver
WOOD  Wood / Timber

Oil and Copper. That’s it… So we have a China Recovery Resource theme to work. Love that PGH. Love the China buying coal play. Love that PCU and FCX copper.

So what happened in the Tech Market relative to world markets?

Recent months - A Tale of Two Markets

Recent months - A Tale of Two Markets

QQQQ  Nasdaq 100 mostly Tech companies
DIA  Dow Jones 30 Industrials
SPY  S & P 500 largest companies in the U.S.A.
MDY  Midcap  (Middle sized in terms of market capitalization)
RUT  Russel 2000 - a collection of 2000 companies from small to large.
EWZ  Brazil fund
EWA  Australia fund
EWO  Austria fund
EWW  Mexico fund

The tech sector is continuing to run. A bit slower than some of the Emerging Markets, but still nice. We have a technical “trade out” call with the Slow Stochastic pointed down, MACD ready to make a crossover to the downside. Time to watch for an entry call and move into those tech sector stocks. QQQQ, AAPL, RIMM, QCOM, PALM (though watch PALM for a drop after the new product announcement…) For the less adventuresome there is HPQ – Hewlett Packard that is rising, but more in the gentle slow and steady way. Not a rocket ride, but a nice “sleep well’ long term investment.

Were Bonds a good idea?

OK, lets take a peak at the Bonds Race.

Oddly, yes. But only the corporate bonds (LQD) and not the long term government paper (TLT). More of a “relief rally” as the pressure of the U.S. Govt. auction of bonds wrapped up without a spectacular failure (the 10 year rate had to rise to over 4% to clear the market, though, so it was not very good news…) It is still time to be out of bonds.

Money in short term paper only (less than 2 years) or TIP Treasury Inflation Protected Securities.

What sectors won this week?


13.76%  DJ US Aluminum Index	  
10.10%  DJ US Marine Transportation Index	  
8.77%   DJ U.S. Industrial Metals & Mining...	  
8.72%   DJ U.S. Iron & Steel Index	  
7.06%   DJ US Nonferrous Metals Index	  
5.49%   DJ US Pipelines Index	  
4.96%   DJ US Oil Equipment, Services & Dis...	  
4.95%   DJ US Coal Index	  
4.92%   DJ US Oil Equipment & Services Inde...	  
4.85%   DJ US Basic Resources Index	 

Golly, where have I seen Aluminum, Ships, Metals and Mining, Pipelines, Oil, Coal, and Basic Resources before ;-)

OK, we’ve dropped down to single digit weekly gains on the BEST sectors. That’s 1% or less per day. Remember that drop of the VIX up above? It shows up here as smaller weekly changes. That’s what I meant when I said now it gets hard. There is less “up” to grab. There is also less “down” volatility too, so risk goes out along with reward…

Again, you can click on the title of this section and then click through any of those sectors on the list to get a ranked list of individual companies. I’m most interested in KALU, AA, NHYDY, and AWC. Aluminum proper has bottomed, so any economic recovery will have these companies going up nicely. AA is still closer to a bottom, but NHYDY and AWC give you exposure to other currencies (Norway and Australia).

A Broad View

Finally, my “Rorschach Race” (under the “Racing Stocks” tab up top too).

EWJ  Japan fund
SPY  S & P 500
EWZ  Brazil fund
FXI  China fund
SH  Short S & P 500
RWM  Short Russel 2000
EPI  India fund
EWU  United Kingdom fund
EWP  Spain fund
EWG  Germany fund

Has India beating Brazil on the change in government. England is moving up nicely too, though from a lower later start due to the election. Shorts continue to make no money. China is lower than Brazil and India, but at the “double peak” we had in this month, it advanced more. The ‘failure to advance in India and Brazil is a bit of a worry, but may just be an artifact of our moment in time. We’ll see. If they don’t advance through that “double top” line, it will be time to start edging out. For now it’s just a worry point.

What Is Our Context

Let’s look at the S&P 500 largest stocks in America compared with some other kinds of assets; a couple of month maturity bond fund, oil, gold, Yen.

Asset Class Races

Asset Class Recent Race

SPY       The S&P 500 ETF
GLD       Gold ETF
USO       Oil ETF
FXY       Japanese Yen currency fund
SHY       1 to 3 year U.S. Treasury Bond fund
FXE       Euro currency ETF
SLV       Silver fund
BZF       Brazilian currency ETF
EWA       Austria ETF
WOOD      A wood and paper products fund

Things of gone flat at the end. Sell in May and go away? This argues for pulling money back from risky positions. The Brazilian Real, Australia fund, and Oil have continued upward. So Oils, Australia and Miners / Resources, and Oil continue as winning themes. Other money gets focused a bit more into those positions with large dividends (as discussed above) and more defensive stocks like HE Hawaiian Electric that has a nice modest dividend but is in a recovering (rising) position as folks realize that the rest of the world will continue to vacation in Hawaii (especially with a cheap dollar) and that takes electricity. Oh, and they own a bank too, so you get a bit of indirect exposure to Hawaiian real estate via the bank. I like HE at this point (own some and will be buying more). FPL (FPL Group – the old Florida Power and Light) and BOH Bank of Hawaii have similar “action” as two separate pieces with some in Florida exposure. If you live in Florida it would be a nice way to pay your electric bill to yourself ;-)

From here on out, for new positions, it will be harder to find rapid rises from June to September and you want some “dividend juice” if you can get it.

Stock Indicators – what and how

If all this talk of indicators is leaving you wondering what the heck I’m talking about, hit the link in the heading of this section and there is a bit of an explanation.

What about Brazil?

Brazil the EWZ ETF vs the BZF currency ETF

Brazil ETF vs Currency Race

It has gone flat for the last couple of weeks (not surprising, given the India election and a bucket of money being moved to India from everywhere else, including Brazil). I expect it to resume the upward charge after options expiration on the their Friday of this month. We’ll watch the chart and we’ll see. That the Real kept climbing is a very good sign.

What About Oils?

XOM  Exxon Mobil - Largest, U.S. / Global
COP  Conoco Philips - U.S.  with Russian exposure
CVX  Chevron Texaco - U.S.
PBR  Petrobras - Brazil
PCZ  Petro Canada
BP  British Petroleum
STO  Norway
E  Eni Italy
TOT  Total - France
RDSA  Royal Dutch Shell
IMO  Imperial Oil - Canada Oil and Oil Sands
SU  Suncor - Canadian Oil Sands
SSL  Sasol - South African Synthetic Oil Company

Interesting. XOM Exxon and CVX Chevron/Texaco were the weekly winners. Even BP looks interesting. Maybe it’s time to roll some of the “oil money” from the prior hot stocks into the ones that didn’t move for a half a year? New money could be put into a bit of CVX, BP, and XOM (in roughly that order) and do OK in somewhat less volatile stocks than the rocket ride Canadian tar sands (SU IMO) and Brazilians (PBR). Oil Services baskets (OIH or XES ) are both moving up faster (due to the rise in oil prices) and it would be a good idea to own a small position in them as well. See the following chart.

Some Near Oil and Oil Related Comparisions

Notice that the the Brazil ETF (named EWZ) tends to move with oil. That is because PBR Petrobras is a large part of it, and the rest tends to move with commodities in general (miners and steels).

This chart shows that USO, an oil ETN that holds futures contracts, has not moved up as well as XES, OIH or other oil services companies (that have almost exactly tracked the actual oil price). Why? Because of “contango”.

There are two conditions in a futures contract.

1) You pay more for delivery a few months from now. This is the “normal” condition, where someone gets paid to store the commodity. It is called “contango”. (Why? Don’t ask why, down that path lies insanity and ruin …)

2) You pay less for delivery a few months from now. This is called “backwardation” and it means that anyone with oil in storage has an incentive to sell it out now.

USO holds contracts for future delivery. Each month, it sells the present contract and buys those further out. In “contango” it is constantly buying expensive oil and selling it cheaper. That prevents it from exactly matching spot oil prices.

In some ways, XES or OIH make a better guide to actual oil prices. And a better way to “bet on oil”. (Personally, I like the oil trusts that pay out a monthly dividend, even though they don’t move as fast as the other oils, but a mix of both XES and PGH is better than either one alone.)

The REITS race – Real Estate Investment Trusts

PSA and HCP both are interesting here (Junk and Health Care – probably both will be with us for quite a while ;-)

The chart shows REITS bottomed but with a small upward movement starting. I’m continuing to hold a small position in REITS with both mall REITS (RPT, PEI) and timber (PCL) along with some logistics (PLD). The best of the 4 is RPT, the safest is PCL, and the slowest but with the most potential (and risk) is PLD.

PEI  Pennsylvania Real Estate - Mall REIT
VTR  Ventas - sr. care, nursing homes, hospitals
PSA  Public Storage - junk storage units
BXP  Boston Properties - office REIT on BosWash corridor  
HCN  Health Care REIT -  extended care, senior care, medical offices
HCP  Health Care Properties - ex. care, senior living, Dr. offices
PCL  Plum Creek Timber - lumber and trees REIT
SPY  S & P 500 broad stock market benchmark
RPT  Ramco Mall REIT
PLD  Prologis - logistics 

And Other Bottom Fishing

At any given time, you want to be rolling some of your big winners into positions that have a lot of head room. If something has doubled, it is not likely to double again at anywhere near the same rate. If something is down 90% (so it would take a 10 times growth to get back to that point) it is much more likely that it can take a “double” back to just 80% down… That’s a “bottom fishing” candidate.

Well, this week Aluminum stocks were showing big life off of a hard bottom. Raw aluminum (JJU) has moved up nicely and the Bottom Fishers are starting to pick up extremely expensive to build assets very cheaply.

The Aluminum Race

The Chinese aluminum company ACH is running hard, partly because it is part of the FXI basket largely used as a “China Proxy” in the west, but I hold all Chinese positions to be a bit more speculative than I like, so I’d be more inclined to have a “small” in ACH and a “full” in AA (or split between NHYDY Norsk Hydro in Norway and KLU / AA in the US.) Let your risk tolerance be your guide. But as the world economy recovers, aluminum will move with it.

Conclusions and Likely Actions

I’m holding my OOTUS positions in Australia, Brazil, metals, miners, and ‘stuff stocks’. I have started a ‘rebalance’, raising a fair percentage of cash during this flat week, and will likely buy more India, and roll into some of the Farms and industrial recovery stocks noted above. Oh, and I’ll probably add to my ag / grain position in JJG and maybe pick up some NIB Cocoa or JO Coffee now that I have some cash free, and a bit of MOO along with some ships to ship it in.

I’m particularly watching ag and food related, given the cool weather and likely crop failures that are shaping up for the year (including drought in places like Argentina and snow in Canada in June).

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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