likely outcome for Potash

I do not think Chinese companies will bid for Potash. They may participate in some sorts of financing. The most likely case is BHP comes back for a friendly offer around 155 U$. Anything above that will require a vote from BHP shareholders which will add lots of uncertainties. The process may frustrate traders because it will be slow. I will buy under 146 U$ and sell above 150U$. The downside is 130 U$

basel III and tax cut

Basel III is kind of light on bank capital which give the financial sector a short term break. The market is rallying on the news. But is it good for the long tem health for the banking sector? We have to see. Loan demand is still very weak in U.S. and the spread is narrowing which is not very good for banks' profits. On the other hand, the loan quality is improving and loan loss provision is decreasing. I am neutral on the sector. I will buy Bank of America under 13 and sell them at high 14s.

U.S. congress is debating keeping Bush tax cuts. One question always raises heated debate is whether tax cut generate more government revenues. The conservatives say yes, and their evidences are Reagan and Bush tax cut brought more tax revenue to government. The liberal says no and the evidences cited before had more to do normal business cycle than tax cuts. My take is both of them are not honest or intellectually incompetent. There is an optimal point for tax rate to raise the most revenue. Just like you throw a ball, everthing being equal, the angle you throw determine the distance. Both zero degree and 90 degree get you nowhere. Of course the optimal point in economy is dynamic and can change over time. But my feeling is it change slowly .

The positives and negastives of the market

The prevail sentiment currently is that the market is undervalued but there is enough uncertainty in economy to prevent money shifting to stock. My view is the market probably is fair valued because the earnings may come down next year and there are many companies' pension obligations in deep holes.

However, there are some positives as well:
1. Overall, competitions have decreased over last two years. Lots of supplies have be taken out.
2. The barriers are high for new companies to come into market because of tight credit situation for small and new companies.
3. The credits are cheap and available, on the other hand, for large and mature companies.
4. M&A activities are increasing.

How do you read Chinese steel market

Over the last two days, Chinese steel prices have jumped between 2-5%. Does that mean that Chinese construction is red hot again? The answer is no. the reason for the price increase is Chinese governments (local and central) had ordered the closing of some steel companies to meet their energy consumption target. It is a supply shock. It can be reversed anytime. Be careful to base your investment decision on the steel price in China.

The market is due for a correction.

what's next

The market had a very good rally yesterday and suddenly everyone is bullish again. To me this is still a range trading market between 1010-1130 for S&P 500. TSX is breaking out its range a bit but 150 points can be attributed to POT. I am bearish on TSX because I feel the banks in Canada are overvalued. Most of them trade over 2X book value.

sold BAC and CSCO

The market is going up nicely and I sold my Bank of America @13.05 and CSCO @20.5

stock rally on China PMI

Chinese PMI data increased a little bit and the markets all over the world is excited. I do not think it was a big positive and Chinese market was down actually on the news. I bougt 200 CSCO yesterday @ 19.85 (sold @ 24 about a month ago). If it goes to 20.5, I am going to take profit.