time to sell POT

I bought POT@140.1 C$ after the BHP was rejected by the Cdn. government. It is now trading around 146.5. It is not bad to make $600 in 3 weeks.

The European problem is spreading and it is giving a boost to U$. I think all paper money will be devalued against precious metal.

north Korea's attack

The attacks by North korea on South Korea is more serious than any other previous skirmish. It is the first time since the end of war that North Korea attacked inside south Korea and killed people. I will guess that South korea will respond strongly with no other choices. North Korea is in the process of power transfer and the attack maybe part of the power struggle. I will not dismiss this one as just another incident.

some opportunities

The market is down and the QE2 is facing lots of resistances and the Fed is defending it. I do believe the Fed is going to do more harm than good in long term. However, the short term support from the easy money is going to support the stock market.

I will put an order in for CSCO @19.5 and IMG (C$)@16.8

Stocks to watch

The market is starting to realize that high energy and food prices are having a real negative impacts on consumers. The Fed may get its wish earlier than expected which is high inflation. I will put the following stocks on my watch list.

IM Gold (IMG), BPO, and CSCO. I will get into these names after another 5%down

net effect of QE2

The QE2 has pushed up all assets classes, from stock market to bond market and to commodity market The wealth effect will make people and corporations more confident and increase economic activities.

However, the negative effects are huge as well. The sharp rise of commodity prices and ever lower U$ will translate to higher inflation whether the CPI number reflects it or not. If for some reasons, companies can not pass the higher raw material costs to consumers, then, profit margin will suffer. The best example is Dean Food.

Eventually, the higher inflation will push FED to withdraw the excessive money supplies, then the bubble will burst. whether it is stock market or commodity market.

As an inflation hedge, the best assets market is U.S housing market right now.

What's next for Potash

Canadian government rejected the bid for Potash from BHP on Wednesday. The stock was down to below 140 U$ yesterday as expected. I bought 100 shares @ 140.8 C$. There are some probabilities on other bids or BHP coming back. However, if there is no more bids, the company is worth about 150 U$, given how weak the U$ is. The easy money policy will eventually lead much higher commodity prices.

back from travel

I was travelling last week. The market is still enjoying the easy money policy by the Fed. I believe it is going to announce a 500 billion QE II on Wednesday. Over long term, this will bring inflation to life in U.S and emerging market.

This week is critical to Potash. If government rejects the deal, then the stock may go down to 140 level. It would be a good buy around 140 U$. If government approves it with a condition, then the stock will trade to 150-155 U$.