summary dec 31, 2009

The market ended the year with a decline. There are three popular predictions in the market: first, interest rate will go up (10 year bond will top 4.5%); Second, the market will move up (S&P 500 will top 1250); Third, crude oil will go up to 85 and beyond. I can not see these three things happen together. At least one of them has to go down for the other two to move up.

I started up my portfolio at the beginning of Nov. My objective is to minimize risk while to outperform the market in long run.

Closing value
Portfolio 1 (U$): 110436 (starting at 110000)
Portfolio 2 (C$): 80812 (starting at 80000)

Happy new year

2009 is not a bad year for the market. It clears out both extremes. The leverage on corporations are down and profits are up. But there are some new bubbles are forming. I hope Fed will start to tight early to fight hew bubbles, not inflation.

Financials in U.S have corrected quite bit. I expect a bounce soon given the wide spread of yield curve. I bought 200 BAC @15.15 today

Computer down

My computer network was down today. The market is taking a break right now. I will keep an eye on interest rate. The trade war between China and U.S is intensifying and China may buy less U.S T-bill as a warning.

Closing value
Portfolio 1 (U.S): 110502
Portfolio 2 (C$): 80766

summary dec 29, 2009

closing value
Portfolio 1 (U$): 110394
Portfolio 2 (C$): 80860

crude oil

Crude oil went up to $79 because of jittery about Iran. It probably will come down to around 75 level. i will put in an order to sell HSE @ 30.50.

The market is tired and there seems a consensus that the market will go up 10% in first quarter and have a correction in 2nd-3rd quarter and move up again in 4th quarter. I think it is silly. You should never base your investments on such a short term projections. My belief is investing based on long term fundamentals and you may realize your objectives in short term which is perfectly fine.

merry Christmas

I wish everyone a merry Christmas and happy new Year.

Closing Value
Portfolio 1 (U$) 110320
Portfolio 2 (C$) 80812

prediction for 2010 (2)

The following events may happen (50% probability), you may prepare for it.
1. Middle east tension escalates (especial Iran and Israel)
2. After 2 calm seasons, the weather may not be as calm during the hurricane season which is not good for insurance companies.
3. Chinese real estate market may start to cool down which will have a chill effect on metal consumptions.
4. The growth in BRIC countries may slower than expected.
5. A major downgrade of sovereign credit to a major country (U.K.? Japan? Russia?)

My prediction for 2010 (1)

Everyone is doing the prediction for 2010. I will throw in some of mine

Most likely (90%+)
1. Interest rate will move up to in U.S. (10-year reach 4.5-5%). You may see a few auctions going badly.
2. Oil will stabilize between $65-85.
3. Housing price will start to go up in U.S.
4. GDP growth in U.S will exceed 3% in first half year but slow down to 2 % in the second half.
5. Steel prices will be down by year end which signify the end of big government stimulus project
6. China will adjust its currency by next September and will buy more gold in its reserve before the appreciation of its currency.

summary dec 22, 2009

The market was quiet and get into Christmas mode. There is some value in real estate market in U.S. and home building companies. If Fed continues loose money policy, it will inflate real estate again.

Closing value
Portfolio 1 (U$): 110270
Portfolio 2 (C$): 80590

GDP

U.S GDP number has been revised down to 2.2% from original 3.3% (How reliable is government's number). The Chinese market was down 2.3%. The U.S market is trying to go up but I have doubt in it, given the bond yield moving up quickly.

I will keep an eye natural gas again. If UNG goes below 9.8, it will be a good entry point

gold and U.S dollar

The U.S. dollar's strength is close to its end, given the dovish comments from fed officials. Gold's correction also close to the end. Gold companies dropped less than gold itself today is an indication of that. My prediction is gold will correct to around 1080.

Potash rebound today and I will not chase it. The foundamentals in short term is troubling, though I like it longer term.

heated wiper?

Can someone invent a heated wiper? It is more useful than all the side airbags

financials

The financials has corrected quite a bit over last week. Besides all the secondary issuance, the confusions of new capital requirement regulation also played a role.It seems the new requirement will start in 2012 not 10 years from now. It will decrease the earnings for the banks but the risks will drop as well. Conservatively managed banks will win in this environment.

Health care reform has passed the hurdle in U.S senator. I do not see how government can manage their deficit given all the entitlements and never-end stimulus. Eventually, the market will force the hand of government by much higher interest rate. When this happens (it will), things will turn ugly.

summary dec 18, 2009

The market has huge volume but little changed. Gold comes back a little but I think it may have a final push down. Potash is down to C$112. Since it was down so fast, I would put an order in for 108 instead of 111. RIM is having a good day (lots of short covering) but in a long term downward trend. Banks have corrected quite bit. I would be interested in TD bank around 62.

Closing value
Portfolio 1 (incl. Cash, 400 INTC, 1000 C, 200 CYB, 200 BRCD, 100 CHL): 110139 (U$)
Portfolio 2 (Incl. Cash, 200 IMG, 200 HSE): 80626 (C$)

potash

I discussed Potash in my previous blog. I like the fertilizer space, especially Potash but feel the valuation is not attractive. Today, POT has been downgraded. I would be very much interested in get in around 106 (U$) or 111 (C$). The long term agriculture demand will be strong.

railway

Since Warren Buffett bougth Burlington, railway stocks have been hot. There are long term bullish arguments for railways:
1. No more new entry. There won't be any more new rails to be built.
2. There will be more trades with China. So there are more demand for railway to transport from ports in west to east.
3. There will be more efficient to transport through rail than trucks, especially there is a global warming accord.
4. There will be more agriculture and resources shipments (crops, coal, fertilizer and etc)

However, there are some negatives as well:
1. Panama canal is expanding and by 2013, there will be more big ships can go direct to east coast from Asia.
2. Most railways are unionized. The labour cost will be difficult to contain.
3. Most efficiency measures have been implemented. It is more difficult to improve productivity.
4. Most rails are old and need capital investments to improve.
5. Although barriers of entry are very high but trucks are alternatives which put a lid on how much rail can charge.
My conclusion is the sector is slightly overvalued. I will be interested after 10 correction. I will buy CNR in Canada around 51.

RIM result

Research in Motion beats estimates by 6 cents and the stock is jumping in after market. My take is RIM will have another couple of good quarters before competitions will force the margin down. In 2010, the smartphone space will be very crowded, RIM will survive but price war is inevitable. If the stock goes up more than 10% tomorrow, it is time to sell. RIM should take advantage of its stock price and its cash to buy a company to broaden its product offerings.

Closing value
Portfolio 1 (U$): 109816
Portfolio 2 (C$): 80596

central banks warning

Central banks start to warning on assets value. Canadian central bank warned stock valuation last week. Hongkong warned a month ago and warned again yesterday on both stocks and real estate. Chinese government is warning against real estate prices. Taiwan central bank warned hot money last week. There seems a trend that central banks can see a bubble forming but they do not want to use the interest rate or tightening money supply to deflate the bubble.

Bought 200 IMG @16.5 (C$) today.

Gold and banks

Gold will drop today. My prediction still stands that gold will correct to around 1080 (1040-1200). I will buy 200 IMG (C$) @ 16.50.

Whitney reduced her estimates on GS and MS which will put pressure on financial sectors. Bank of America and Citi's new equity raise are very expensive. It does not bode well in short term for these stocks.

Overall, the market will be weak today.

summary dec 16, 2009

Fed did not change anything and the market is weak. There are too many secondary issuance and will put pressure on the market.

Closing value:
Portfolio 1 (U$): 110086
Portfolio 2 (C$): 80693

Inte, FED and weather

Intel has been sued by FTC for monopoly which will hurt the stock. If it drops below 19, I will buy 200 shares.

Federal reserve will make their decision this afternoon. I did some predictions two days ago. The market's reaction will be muted. Fed is overall dovish.

Weather is experiencing a cold front and will support oil in short term. Natural gas is moving up too fast. I sold UNG yesterday @ 10.20.

Everyone is looking for year-end rally. The market usually disappoints in this situation.

keep cash

For C$ portfolio, I sold 200 MFC @ 18.8 and keep most of the money in cash. The only position is 200 HSE in C$ portfolio..

PPI is high

The inflation number is high. Moody is saying it may cut Uk and U.S rating in 2011. The pressure is building up on Fed and easy money policy. Chinese government is warning on real estate market.

Natural gas continues up trend and it gets into normal range with oil price ratio. I will sell UNG today at $10.20. Gold is getting interesting and I will buy IMG (C$) at 16.50. Watching POT carefully.

summary dec 14, 2009

The market is slow and up a bit. Fertilizer stocks was down about 5% over last dew days as I expected. It is getting into interesting range. The only one I am interested is Potash. Potash is in tight supply and capital investment is huge to start a new mine.

Natural Gas is up today but UNG did not reach 10.20

Closing value: Portfolio 1 (U$): 110458
Portfolio 2 (C$): 80543

Dilemma for lending

President Obama is meeting bankers and push them to lend. However, if he is successful, the lending will make the volecity of money faster which will worry the FED. The Fed may have to pay higher interest rate on reserve and keep banks from lending. Politically, it is going to cause outrages. So the tool for Fed to increase interest rate on reserve is a non-starter.

My forecast for Fed meeting this week
1. Will keep interest rate the same
2. Will keep the language of keep rate low for extended period
3. Will extend the MBS purchase beyond Apr. 2010 and reduce the amonunt it purchases. This will give the market a signal that the Fed is ready to exit but mindful of potential problem. So it wants the flexibility.

Dubai bailout and XTO deal

Dubai has been bailed out by Abu Dhabi, it is not a surprise but showed governments everywhere try to bail out their private sectors. The leverage has been transfer from private sector to government.

Exxon by XTO will push energy stocks up a bit today. cold weather is giving Natural gas a lift. I will sell UNG @10.20 today.

summary dec 11, 2009

The market is up a bit. The long term bond yield has moved up quite bit this week. If 10 year yield move to over 4%, that would be troublesome. The lower crude oil price probably provides some relief for consumers. If oil price go below 68, then you will see a debt problem from Russia and middle east, possibly Mexico as well. Fed won't change interest rate unless forced by market. Gold will rebound soon (my guess is gold will correct to 1040-1100). Will buy IMG (in Canada) around 16.



Closing value
Portfolio 1: 110463 (U$) (original investment: 110k, started Nov, 2009)
Portfolio 2: 80350 (C$) (original investment: 80k, started Nov., 2009)

sold 200 HSE

sold 200 HSE @ 28.05.

China mobile

CHL's valuation is appealing. P/E is 12 and dividend is around 3.8%, debt/equity less than 0.1.

Bought 100 at 45.75.

global warmimg

The debate on the science of global warming is intensifying. Since the risk doing nothing is much higher than no global warming, I expected some agreements will be reached. The compliance, however, will be difficult. The only possible solution is electronic car (EV). If EV becomes popular in next 20 years, then we will solve the problem. All other things, like wind, solar power and conservations will help a little but not make a big difference.

Today's market will move up a bit on China's data. Will sell 200 HSE over 28 (just bought 200 at 26.89 tow days ago).

summary dec 10, 2009

closing value
Portfolio 1 (U$): 110599
Portfolio 2 (C$): 80015

where is the risk in carry trade

There are many chats about carry trade risk (borrow U$ and invest in riskier assets). Commodities are at risk if the carry trade reversed. However, the biggest risk is the one people are not focused on. Corporate debt from Russia. Many Russia companies are highly leveraged and they borrowed U$ to finance their operation. If crude oil stay below 65 U$, a huge credit problem for Russia companies.

Natual gas

Natural Gas has moved up to over 5 U$ again. Due to the rigs cut on almost all natural gas companies, it is possible that natural gas may shot up if we have a really cold winter. However, it is a trade only. Over long term, there are plenty Natural gas in North America. I will sell my UNG over $10.20

HSE I bought @26.89 yesterday has gone up to 27.5 today. Will sell 200 share if it reaches 28 today.

crude oil

The winter arrived. This should stabilize crude price. I bought back 200 HSE back @26.89 (last time sold @28.05)
Fertilizer Stocks are going up too fast. I expect a correct soon.

The market starts to force governments to withdraw stimulus by downgrading crdit rating on Greece and Spain.

summary dec 8, 2009

The market is down 1%. Japan is having another stimulus package and this is the fifth one in 3 years. Japan's credit rating should be lowered but all credit agencies do not have the guts. The difference between Japan and Greece is Japan can print out its own money while Greece can not.

The correction in gold and commodities is close to the end (another 3-5%).

My objective for my portfolio is to beat the index while have 50% less volatility. So far, my portfolio 1 is trailing S&P 500 by 1% with 80% less volatility while portfolio 2 is .5% behind TSX while volatility is 90% less.

closing value:
Portfolio 1 (U$): 110475
Portfolio 2 (C$): 79985

U.S. dollar

The U.S. dollar strength is put pressure on the stock market. If U.S. dollar suddenly move up 5% (It is unlikely), there would be rush out all carry trades, which will be especially hard on commodities. I still believe gold will correct to 1o40-1100 range.

As predicted in my blog 10 days ago, Greece credit rating has been cut. Over next two years, Japan and U.K credit rate will be cut.

summary dec 7, 2009

The market did not do much today and gold recovered a little bit. Lots of rotation are going on. Defensive stocks, like Walmart is doing well.

Fed reserve is trying to push assets prices higher to create some wealth factors by maintain zero interest rate. Long term rates, however, will move higher.

Closing value
Portfolio 1 (U$): 110529
Portfolio 2 (C$): 80062

correction in Gold

Gold is correcting as expected. My expectation is 1080/oz would be a good start point to buy some. Chinese government is eager to diversify its reserve to Gold. However, it doesn't want to be seen buy gold higher than India. there should be very strong support @1000.

close HXD

Just as expected, Gold and commodity all went down and TSX is down 130 points. I closed myHXD @ 13.04

job number

The job numbers in both U.S and Canada are stronger than expected. The market will pop up initially but will have to deal with higher interest rate sooner. Sometime what good for main street may not necessary good for Wall Street. High interest rate will be negative for utility stocks, positive for financial sectors (lower loan loss and high spread), slight positive for high tech industry and very negative for government financing.

Gold will drop today and I expect it to correct around 10%. It will be a good buy round 1080.

market reverse

The market reversed and ended down today. The employment data tomorrow will have an impact on the market. A strong report will raise the expectation on Fed to withdraw stimulus while a weak report will add second dip worry. The market is hoping a positive but not too strong data.

Closing value: Porfolio 1 (u$): 110281, Portfolio 2 (C$): 80005.

sold GS

Sold GS @168.5. I do not like the market trend.

order filled

sold 200 INTC @ 19.9 and bought 100 GS @167.5. If GS goes above 170 today, I will take profit.

Band of America payoff Tarp

This is a positive news for the banking sector in U.S. It is an indication that loan loss in big banks has stabilized. It will push financial sector up today. The financial sector has been in correction for the last few days.
I will buy 100 GS under 168 and sell it around 175. sell 200 INTC at 19.9

why gold up and oil flat/down

Commodities go up because paper money lost its appeal. The reason of Gold moving up faster than oil and other commodities is that gold is easy to store. Investors can physically take gold but not oil. Oil is reflective more about economic foundamentals than Gold. In this easy money environment, gold is a better bet than oil. But as I mentioned yesterday, a top is forming for gold andyou want to slowly to take profit. Usually, stocks will stop moving up before gold itself.

Will take some profit today on INTC. Sell 200 INTC @19.85

summary dec 1, 2009

The market is marching higher but the valuation is not attractive.

Closing value
Portfolio 1 (u$): 110128
Portfolio 2 (C$): 80001

gold

Gold has reached 1200/ounce and it has all the reasons to go up. The most important one is the lack of trust for the paper money. However, the speed of appreciation has quickened. If you have gold or gold companies, it is time to take some profit. I can see Gold to go up another 5 to 10% quickly then a correction.

China hinted that they want to increase their gold reserve by 200% in 8 to 10 years. But they are very opportunistic. I do not see them to buy at 1200

U.S dollar falling again

The U.S. dollar is falling again and it is pushing up the stock market. Japan is increasing Quantitative easing (printing more money). The party goes on. I do not see how all these would be good for long term when every major economy is printing money or borrowing like crazy. Short term, the market will like it.

Will close HXD around 13.1 today