risk appetite is waning

The market risk appetite is waning after the Dubai situation. This will lead a more volatile market and more pressure on commodity and stocks. One wild card is Iran. A strike by Isareal will have a very negative impact on stocks but will help oil.
The investment connunity right now has a mentality that government will step in when thing go wrong. It is very unhealthy and the moral hazard is high.
The asia market is up and European market is down. The north American market probably will have a relief rebound today.

summary nov 27, 2009

Closing market value

Portfolio 1 (U$): 110090
Portfolio 2 (C$):80112

Sold 300 HXD @13.59 and bought back @13.05

Who is next after Dubai

This is a question being asked by investors. The deep recession has transferred private debt to public debt. Government are heavily in debt. I discussed Japanese situations in my previous blog. If interest rate move up 100 bps, Japan is going to be in deep trouble. Japan, however, won't be the next problem country. My guess the next one would be Greece. Its debt has reached 100% GDP and it can not print its own money. EU and IMF may come to its rescue but it will pay a heavy price.

rebound

The market start to rebound. Everyone seems sure the Dubai situation is under control. I will be cautious.

Bought back 300 HXD @ 13.05.

sold hxd

Sold 300 HXD @13.59 at open. Will buy back @13.15

Yen, gold and Dubai

Dubai debt problem is still playing out. There is power struggles between Abu Dhabi and Dubai and Dubai has to yield power to Abu Dhabi if a bailout is required. Yen has reached new highs and intervention is likely now. Gold has been down 30 dollars as expected and probably will go down further but I do not expect gold's correction exceed 10%.

will close out HXD at the opening. Will buy 200 BAC @ 14.7

summary nov 26, 2009

Tomorrow will be an interesting day. Is Dubai's debt an one-off incident or it going to spread? The European market will give the clue. The U.S. market is priced to perfection so a sell-off is most likely even some bailouts are arranged.

Closing Value
Portfolio 1 (U$) no change from yesterday due to holiday
Portfolio 2 (C$) 80012 (C$)

More on Dubai

Dubai's property market bubble is bursted a year ago. The price is down 50%. The support from dubai government won't mean much to investors. Abu Dhabi, on the other hand, will have the means to bail it out and it will get heavy pressure for Dubai, middle east countries, Europe and U.S. to bail it out. Whatever the consequence, it will remind investors of risk again.

Dubai blues

The market is hit by Dubai world's decision to delay debt payment (the news came out yesterday but the market react today). The market still not sure if the Government (especially Abu Dhabi) would bail them out. If not, all emerging market bond will stock market will get hit and U$ will go up violently for short term. Gold probably will go down first but shot up again because U.S has to print more money to prevent the problem spread. It is worth watching closely. Vietnam just became the first country in Asia raised its interest rate and devalued it currency by 5%. The global financial system is in shaking ground.

At this moment, the downside risk is more than upside potential. I sold 200 HSE @ 28.05 today and bought 300 HXD @13 all in Canadian portfolio.

summary nov 25, 2009

Went to my daughters' swimming meet this afternoon. The market is quite.
Closing Value
Portfolio 1 (U$): 110274
Portfolio 2 (C$): 80014

Nature Gas breaks out

Nature Gas starts to break out on the upside. It is the most cyclical resource. When the price is Below 5$, companies will not put in new investments and in a year time, you will have supply shortage. On the other hand, if price goes over $7, supply will come back.

Be prepare to sell UNG around 10.5 in next couple of weeks.

Happy thanks-giving

It is Thanksgiving tomorrow in America. Happy thanksgiving

The employment data (initial claims) is good which will push the market up but it will be a quite day. I will sell 200 INTC @19.7 (still keep 400 shares).

Russia central bank is buying Canadian dollar for its reserve which is push C$ higher buy more than a cent. It becomes uncomfortable for central bank in Canada. The strong C$ will have a negative impact on profit margin in Canada.

price war between Walmart and Amazon

Just as I predicted in my previous post, the price war between Walmart and Amazon has spread from books to everything else. It is great for consumers but not so good for the companies. Walmart can afford to lose money on their online business for a couple years to build it up but Amazon can not. Online is its only business. In a year, Amazon stock price will collapse just like RIMM. Online shoppers are very price conscious. Competition will kill the margin.

sold hxd

The market seems stalled. Sold HXD @12.92.

short term trade

Bought 400 HXD (doule short TSX) in C$ portfolio @12.8 and will sell them @ 13.05.

revised GDP in U.S and potential credit tighten in China

U.S has revised the GDP from 3.2% to 2.8% which will give FED more reason to stay loose. On the other hand, China has warned its big five banks to bolster their balance sheet. My guess they will raise capital and reduce loan growth in 2010 which will slow down the growth in China.

There will be some profit taking in the market today.

summary nov 23, 2009

no trde today
closing value
Portfolio 1 (U$): 110208
Portfolio 2 (C$): 80075

free beer for drunken sailer

A drunken sailor sat in a bar and everyone was amazed that he was continuously given free bear. So one of them went up and asked the manager behind counter, "how come you give him more free beer, he is already drunk?" "Oh, it is too dangerous if I do not give free beer to him because he is going to go out and drive. I am saving people's life" the manager answered.

Is it too dangerous that Fed stops printing money or raises interest rate a bit?

Fed won't exit

The fed is hinting again that they would extend the buying of Mortgage backed security to a future date. Just I discussed in my previous blog, Fed won't tight unless being force. It in short term creates stimulus for everything. It will push assets price up (include stocks, gold, commodity and real estate). In long run, it going to create bubble for everything and inflation.

summary nov. 20, 2009

This is an interesting week. Lots of talks about bubbles in the market. It may take more time for the bubble to develop before it burst. I discussed some bubbles in my previous blog. Usually, bubble close to burst when most people are on board and you can make money easily if you are in it. The biggest bubble right now is real estate in Asia (Hongkong, Singapore and China).

Today's trade
Bought 200 BRCD @7.87. Today is the record day for Husky (HSE) dividend record day (30cents/share)
closing value:
Portfolio 1 (U$): 110071 (cash, 600 intc, 200 brcd, 200 cyb, 1000 c and 500 UNG, starting value @110,000)
Portfolio 2 (C$): 80086 (Cash, 400 HSE and 200 MFC, starting value @ 80,000)

one growth area

The one growth area is data storage. The growth did not slow in recession and will accelerate over next few years. All those videos, social networks and mobile Internet will continue to grow. One company is interesting is BRCD, which has been partnering with IBM, HP and EMC. The stock came down because the takeover premium disappeared (due to HP acquired 3com). But I still believe it can be acquired by IBM or HP. If not acquired, it can stand on its own. My target is 12 for takeover and 9 without takeover. The biggest competitor is Cisco. I do not believe that IBM and HP will give the business to Cisco from BRCD any time soon.

I bought 200 shares @ $7.87 today.

credit spread

The credit spread between Treasury bill and corporation debt has narrowed dramatically over last 6 months, which indicates the market has confidence in corporations' balance sheet and their abilities to generate cash. This is a bullish sign. My sense of the market is any correction in short term will be shallow. The long term outlook, however, is not favourable.

Will sell FMC (C$) at 19.

summary nov.19, 2009

The market is down and probably has more to go. Dell's results are not good. There is a lesson for long term investors. No companies can keep a high margin for long, no matter how good their business models are. High margin attract new competitions. High growth/high margin companies eventually become slow growth mature companies.

Today's trade
Add 200 more shares of INTC @18.98 in portfolio 1 and 300 shares of MFC @ 18.65 (C$) in portfolio 2
Closing value:
Portfolio 1: 110033 (U$)
Portfolio 2: 79986 (C$)

Manulife

MFC (C$) is issuing more shares @19. I just bought 300 shares @18.65 in the market. The dealers are going to support it and push it to 19. Will sell if it goes above 19 in a week.

Bougth another 200 INTC @ 18.98.

some bull arguments

I have been arguing bear case for some time. Today I want to point some bull arguments, though I still think the market is overvalued right now.
1. Do not fight the FED. Federal reserve is flooding the market with money which is a very strong force to push assets price up in short term
2. Productivity growth. Companies are becoming very lean during the recession. The persistent high unemployment rate means corporations are determined to keep the productivity high. It all translates to high profit margin.
3. The lack of credits is favouring existing corporations. New companies and technology are slow to get out of the ground. On the other hand, for mature and profitable companies, such as Walmart and IBM, the financing costs are very low right now. It created a high barrier for new competitions
4. The depreciate dollar will make global companies more profitable in dollar term, though it will decrease the living standard for Americans.

These are all short term bull arguments.

Today's trade
The market will go lower today. Bank of America downgrade INTEL. I will buy another 200 shares if it goes below 19. I think there is a pent up demand in enterprises to upgrade their computers due to Window 7

summary nov.18, 2009

Walmart has cut price up to 60% which will no doubt depress the margin for retail industry. Goldman (GS) did some PR today and it's difficulty to change the image. GS gets most of its profit from trading while protected by the FED. That's the reason people do not like GS. Why GS can continuously outperform the market in their trading desks? Are they smarter than others? I doubt about it. I dealt with mutual fund managed by GS before and its performance is average to below average. One reason the traders are doing better is information advantage. GS releases its research reports to its best clients before the public. Traders are probably the first group to receive information. So on normal conditions, their traders are making lots of money. However, in extreme conditions, GS is far more riskier than JPM or MS. It is basically a giant betting machine.

Today's closing value
Portfolio 1 (U$): 110376
Portfolio 2 (C$): 80104

Crude oil

Are we facing peak supply or peak demand in crude oil? The major factor in crude oil price in long run is not determined by how strong the economy but by what car we drive in the future. All the alternative fuel are not competitive in terms of cost. Electronic car (EV) however, will change the whole dynamics. If in next 10 years, EV can capture 10% of the market and in 20 years, 30% of the market, then indeed we have seen the peak demand of crude oil. If EV is a burst, we will see crude go back to 100 again. All the new discovery are offshore deep sea oil which cost a fortune to get it out.

Today's market
Canadian market becomes over valued. The strong C$ will depress margin for Canadian companies. will buy 200 HXD (short TSX) @ 12.55

summary nov.17, 2009

The market is very resilient and the favarable seasonality is coming. However, the valuation is lofty. I will keep at least 50% in cash.

I did not do any trade today.
Closing market value
Portfolio 1 (U$): 110549
Portfolio 2 (C$): 80336

Bubble

Fed reserve does not believe there is a bubble in U.S. So it gives a green light to commodity and stock market. Given that Fed partly responsible for creating two previous bubbles by keep rates too low for too long, it is right to question its conclusions. though there may not be an obvious overall bubble yet in U.S., it is a question that localized bubbles are forming. Some observations
1. real estate market in China. In Beijing and Shanghai, an average 1200 sf condo (apartment) sale for 2.5 million yuan and average family income is 100,000 yuan. The ratio is 25:1 and the normal should be around 5:1. There is definitely carry trade going on. It is reported that banks in China have shortage in U$ because people borrow U$ and convert to Yuan to buy assets. The bubble may last until interest rate goes up or the expectation of appreciation of yuan being realized.
2 E-commerce companies in U.S. I do not know anything Amarzon can do but Walmart cannot. so while Amazon trade 4 times more expensive than Walmart.
3. Treasury Bill and JGB. Both U.S. and Japan are issuing enormous government bonds but the yields are very low. The bubble may burst when central banks stop QE. On the other hand, if QE continues, then commodities will go to the roof.

Today's trade
If the market go up another 1%, I will buy 100 SH (short s&p 500) @52.5.

summary nov.16, 2009

The mar isket is ahead of itself and it is fueled by easy money. Nobody knows when it is going to end. But when it ends, it will be ugly.

Closing market value
Portfolio 1 (U$): 110512 (cash, 400 INTC, 500 UNG, 1000 C and 200 CYB, oiginal value 110000)
Portfolio 2 (C$): 80124 (Cash and 400 HSE, original value 80000).

where is the growth

There are some confusions in the market. Is the growth in China real? Is U.S. on the verge of a V recovery? Is the market priced in 4% real GDP growth? Why crude oil went up over 100% with high inventory?

The growth is very high right now in China. How much is artificial due to Government intervention is debatable. But the growth is there and that is the reason couple with India and Brazil that pushed oil and other resources up.

U.S. is experiencing a deleveraging process which will last for several years. Most the liquidity provided by Fed went to treasury bill, emerging market assets and hard assets. The bubble in all these categories are starting to emerge. There will be pain when interest rate start to rise.

intc and C

Intel has incresed its dividend and which is positive. I would target set my @21.5. Citigroup is a speculative buy. John Paulson bought over 1 billion dollar stocks. In short run it may puch it closer to 5 dollar. Buy under 4.20. I have bought 1000 shares @4.18. my target is 4.95.

summary nov 13, 2009

The market has a modest rally. There is still a possibilty for a year-end rally but be very selective and cautious. On Monday I will post my thoughts on the atrractiveness of some sectors.

Closing Value:
Portfolio 1: $110,186 (U$)
Portfolio 2: $79928 (C$)

close out SH

The market seems stalled and I closed out my SH position @54.05. Anything can happen during weekend.

technical trade

The market looked tiere. Just bought 200 SH (short s&p 500) @ 53.85. It is a technical trade. I have put in order to sell it @ 54.25. It is a risky trade.

Does market look ahead?

There are many people arguing that the market is not expensive, given zero interest rate and resurgence of profits. However, if market always looks ahead 6 months, then we have to see what is going to happen in 6 months. By the second half of next year, Fed will stop QE (mortgage rates will go up), health care legislation probably passed, tax cut will soon expire. Still unclear are interst rate, inflation or deflation, oil price and global expansion. In this context, I am cautious. The market may run a bit higher by the end of year due to seasonality but I will not chase it.

summary nov 12, 2009

The market is creating opportunities in energy sector. Chinese and Indians will eventually consume more oil than Americans.

Clsoing market value
Portfolio 1 (Cash, 400 intc, 200 cyb and 500 ung): 110092 (U$)
Portfolio 1 (cash and 400 HSE): 79892 (C$)

bought intc back

Just bought 200 intc back @19.7.

sell 200 INTC

sold 200 intc @20.20. will buy it back @19.70.

Income or Assets

Which one is more important, assets or income? For most mature companies, it is no question that assets is more important. Net income can change quickly and easily manipulated. Assets are more stable and difficult to be manipulated. Inside assets, pay attention to the quality. Cash is always the best. Inventory does not count much for high tech companies but worth a lot for commodity companies. Brand is very important for a small number companies like Coke-cola but woth almost nothing a vast majority compoanies. Loan quality is the most important factor for analyzing financial companies.

If you can buy a company below its replacement value, it is a bargan. I always like to buy an index below its replacement value. For S&P 500, the replacement value is 770.

summary nov.11, 2009

bought 200 shares of INTC, CYB and HSE.

Closing value:
Portfolio 1: 110170 (U$)
Portfolio 2: 80044 (C$)

Chinese Currency

Chinese currency has been blamed on the job loss in U.S. and the pressure is mounting for China to float its currency. My prediction is RMB is going to start gradually appreciate in next 6 months and be fully floating in 5-7 years. The downside for a stronger RMB are
1. a 10% increse in RMB will increase 1% inflation rate in U.S and will hurt low income population harder.
2. China may not buy as many U.S. denominated bonds if it is going to devalue against Chinese RMB and instead it will demand U.S. to issue Yuan denominated bond which will generate some potical heat in U.S. and raise interest rate.
3. It will be cheaper for China to buy nature resources and will increase the price for crude oil.

The trade is to buy ETF CYB to play on Chinese currency appreciation. Do not expect any gain in short term but in two years, you can expect 10-20% return with very low risk.

I am buying 200 CYB at 25.34 (U$).

order filled

bought 200 INTC @19.65 and 200 HSE @ 28.8 (C$). HSE is going to pay 30 cents dividend on NOV. 20

U.S dollar and real assets

The fed is determined to liquidify and inflate the market. The continue downward pressure on U.S dollar will benefit oil and global high tech compay. Will add 200 INTC (below 19.70) and 200 HSE (below 29) today.

Pay attention to JGB

Japanese 10 year bond yield rose to 1.47% from 1.25% (still relative low) in a month. Consider the debt/GDP at 200%, a small rise in yield will add huge deficit to the government. If yield in U.S go up 1% on average next year, it will add 10 billion dollar to deficit on new issurance alone. Pay attention to Japn and it is a prelude to what may happen in U.S. A 2% in JGB and 4% in ten year U.S. bond will be very damaging.

Closing value
Portfolio 1: 110061(U$)
Portfolio 2: 80133 (C$)

When is fed going to tight?

The fed is afraid to upset the market and won't tight unless the market forces its hands. There are some potential amrket events can cause it.
1. The bond market can no longer digest large new issurances and demand a higher rates
2. Higher inflation.
3. The decline of U.S dollar reaches crisis level.

It may take another 6 months to a year for theses events to happen. But I really doubt we can print money and spend on deficit to prosperity.

I will not put order at the market open

summary nov.9. 2009

no trade today. There is bubble in some stocks. The p/e for Amarzon is over 60 for next year earning. Considering Warmart and others all get into this space, the margin will shrink. Even earning can grow 30%/year for next three years (very unlikely given the low barrier to get in), the p/e will still be 30 after three years. Same problem with priceline.

closing value

Portfolio 1 (U$):110238 (cash, 200 INTC and 500 UNG)

Portfolio 2 (C$): 80103 (cash and 200 HSE)

The market is not cheap

I will wait to put new money into work. If the market continue go higher another 5 %. I will start to put some shorts in.

summary for the week

It has been a week since I start the blog and portfolio. The biggest mistake I made was the low bid for IMG (not get filled). The best one was buying INTC @ 14.45. My objective is to beat the market with 50% less volatility.

I started with 110,000 U$ in portfolio 1 and 80,000C$in portfolio 2. The MV at market close today are
Portfolio 1: 110097 (CASH, 200INTC AND 500 UNG)
Portfolio 2: 80011 ( CASH AND 200 HSE).

UNG filled @9.5. Change BAC order to $14.6.

technical analysis

Should ywou trust technical analysis? It really depends on your belief whether the purchasing price will influences 'sell ' decision. Theoritically, it should not. You should always base on your decision on the current foundamentals. But in reality, people do based on their decision partly on their purchasing prices. So the pattern do reflect the psycology. However, foundamentals will triump technicals eventually. My recommendation is to select a stock on foundamentals and timing the trade on technical analysis.

employment

The data overall is ok.

orders in for 400 UNG @9.5. 300 BAC@14.8. Add 200INTC@18.7.

Smart phones

Is RIMM cheap? Is Apple expensive? How about MOT? My take on smart phone is two-folds: on one hand, the demand is growing rapidly; on the other hand, the barrier for entry is very low. The technology is easily replicated. In one year, it will become a commodity, just like all the cell phones. If a company can manage well, it will look like Nokia. If not, it will follow the fate of MOT.

summary nov. 5

The hardest thing for an investor or trader is to have the patiance to sit tight and wait for your entry point. Opportunity will always come back.

No trade today.
Clsoing value Portfolio 1 (U$): 110081
Portfolio 2 (C$): 79997

will put in orders for
100 CHL (China mobile) @ $46.5. China mobile is the largest cell phone provider in china. The growth has slowed but p/e is 11 and dividend is 3.4%. One catalyst is it may list in China which will give it a much higher value.

500 UNG@$7.5.

summary

the Fed is afraid to upset the market which is bearish for U$ and long term treasury. Be careful when 10-year rate approach 4% and crude oil above $85.
The market is stalled and may go down before a final push higher before year-end.

Did not do any trade today. Will keep an eye on UNG (nature gas etf) tomorrow. Winter is coming and drill rigs has been reduced by 50% for nature gas. Usually the relationship between oil and NG is 6X (if nature gas is $5 and crude oil should trade around $30, the extrem is 12X), But now it is 16X.

Closing value today: portfolio 1 (U.S.):cash 106303 INTC 3718. Total:110021
portfolio 2(Canadian): Cash 74383 HSE 5562. Total:79945

it's a fed day and I would like to watch it. If there is opportunity, I will put orders in for BAC, WMT, POT and TD.

Is there a huge carry trade (borrow U$ and buying risk assets)? According to Roubini, that is the case. I am not too sure about that. If you look at the velocity of the money, it is very low. The reason of gold strength is more to do with long term decline of U.S. power (huge deficit and no end in sight). I am a bit worry about the bubble of property market in China. It may take another 2 to 5 years for it to burst. The residential value in Shanghai is closing the GAP with New York city and commercial property already passed New York.

summary

MV for today. U.S. Portfolio (Cash and INTC): $110003. Cdn profolio (Cash + HSE):n$79943. It's a pity I did not get IMG filled yesterday. It's up 12% today. But market will always give you another chance.

My market view: no body knows in short term. I am not very optimistic in long run. The oversized return between 1980 to 2007 is helped by information technology revolution and financial engineering (leverage). The positive impacts of them are close to the end. The stable inflation over last 20 years is due to the cheap imports from China and other emerging market. The depreciation of dollar and the increase of fuel cost will make it hard to contain inflation over long term.

My reason for my picks and my targets

HSE (Husky energy). An oil gas company trade in a low P/E, good reserve, and 4+% dividend, good exposure in Asia and major shareholder is a deal maker in Asia. Target $34 (but will take profit if going up quickly)

INTC (Intel). Earnings are great and Window 7 is going to puch a major upgrade cycle in business. Target: 21.5

intc filled

got filled for intel @18.45.

establish some positions

orders in: 200 intc @19.45 and 200 wmt @$49 for U.S. account

100 TD@61 for C$ account

Warren is buying railway. It is unlikely that CN will be a target any time soon.

SUMMARY

So close to get intc and BAC but did not.
Closing value
110,000 in U.S. portfoio
79933 in Cdn portfoio

See you tomorrow

Got 200 HSE @28.05 total cost $5617 C$

intc, td and more

The market will open high but may drift lower . I will put in some orders

For U.S. account, limited orders: INTC (200 sahres @18.50), BAC (200 shares @ $13.9) and WMT (100 shares@$48)

For Canadian account, limited orders: TD (100 shares @60.8), HSE (200 shares @28.05) and IMG (300 shares @ $13.2).

I will post when my order get filled.

my start

Hello everyone. I had some success in my investment during last two years and I am neither a bull or a bear. So I like to post real time my investment / trading strategy for you. The portfolio contains cash and shares (common, preferred and etf). I will not post my fixed income portfolio.

I am going to start two portfolio: one with $110,000 U.S.$ (investing in U.S.) and $80,000 Cdn.$ (investing in Canada) tomorrow. My transaction cost is $7.

see you tomorrwo