Global Market Comments
December 15, 2014
Fiat Lux
Featured Trade:
(A DAY WITH TOM FRIEDMAN OF THE NEW YORK TIMES)
(THE BEST FINANCIAL BOOK EVER),
(THE NEW COLD WAR)
Global Market Comments
December 12, 2014
Fiat Lux
Featured Trade:
(DECEMBER 17 GLOBAL STRATEGY WEBINAR),
(IT RAINS IN CALIFORNIA!),
(TESTIMONIAL)
As I write to you, torrential sheets of rain are pounding the windows of my home. The wind is shaking the building down to the foundation. I?m typing as fast as I can, and praying that the power can stay on long enough for me to finish this piece.
And, oh yes, people are cheering.
The ?Pineapple Express? that barreled in on we San Franciscans from Hawaii is expected to dump 5-8? of rain, with some neighborhoods getting a drenching 13 inches. Much of the city?s downtown is without power, and the BART station is closed.
That compares to a normal full year of 23.64 inches, and a minimal 12.54 inches last year. That was one of the driest years since 1851.
It was probably the most widely forecast storm in California history. Almost every Bay Area school system closed. The California Highway Patrol warned drivers to avoid non-essential driving. Many took the hint and enjoyed a day off.
What was really interesting was the 77-year-old Golden Gate Bridge?s 70 mph design limitation. That?s the speed that local gusts reached. To be safe, the Bridge Authority limited traffic to a single lane each way, and banned trucks outright. As of this writing, it is still standing.
The storm at Lake Tahoe was even more amazing. Winds near Donner Pass were clocked at 135 mph. Some four feet of snow fell at the upper altitudes. The Trans Sierra Interstate 80 has been closed for hours. The onslaught rescued the Christmas ski season just in the nick of time.
It looks like I?ll be taking my snowshoes out of storage early this year.
After suffering through a five yearlong drought, it is now expected to rain nonstop for three weeks.
The drought inflicted a serious economic impact on the state. The prices for our major crops (DBA), grapes, almonds, hay, cotton, oranges, walnuts, rice, apples, and lemons have been soaring. Even our largest cash crop, marijuana (an estimated $5 billion per annum), was affected.
Farmers resorted to drilling deep wells of 1,000 feet or more to tap ancient aquifers. That has led to widespread subsidence. Some areas are now ten feet lower than they were 100 years ago.
The drought all added fuel to the political fires. Many of the battles here have long revolved around water, with profligate Los Angeles (huge lawns, golf courses, and too many people) perennially attempting to steal H2O from the wetter north, via long, expensive canals that we all have to pay for. Now that everyone is soaked, perhaps tempers will ease.
Thank you for the many emails expressing concern for my safety. Even I was not willing to undertake my nightly four-hour mountain backpack in this pestilential weather. However, I will be shopping for a new set of patio furniture, once the January sales hit.
Is anyone knowledgeable about Costco?s offerings on this front?
?You have to be very careful giving up analogue dollars for digital pennies,? said Jeff Zuker, CEO of NBC.
Global Market Comments
December 11, 2014
Fiat Lux
Featured Trade:
(OIL GRINCH KO?S CHRISTMAS RALLY),
(SPY), (OXY), (XOM), (SCTY), (FSLR), (VSLR), (XLK), (BBH),
(TESTIMONIAL),
(AN EVENING WITH CONGRESS BARNEY FRANK)
SPDR S&P 500 ETF (SPY)
Occidental Petroleum Corporation (OXY)
Exxon Mobil Corporation (XOM)
SolarCity Corporation (SCTY)
First Solar, Inc. (FSLR)
Vivint Solar, Inc. (VSLR)
Technology Select Sector SPDR ETF (XLK)
Market Vectors Biotech ETF (BBH)
The continuing collapse in oil prices has finally spilled over into the real world, at its worst knocking 290 points off of the Dow Average yesterday.
Traders who grew accustomed to a market that went up like clockwork every day were in for a rude awakening. Is the positive case for equities coming to an end?
Is the bull dead?
Not yet. All we are seeing is a normal 5%-7% correction in a long-term uptrend. It?s really all about the numbers, as it always is.
American companies are still on tract to increase earnings by 10% in 2015, and S&P 500 earnings are set to reach $130. Technology and innovation are hyper accelerating. Our energy costs have been cut in half, creating a giant tax cut. The world still wants to send its money here.
Goldilocks is still alive and well, just momentarily hiding under the bed.
Yes, it?s another buying opportunity.
This time, however, it?s different.
Oil has gone down so fast, some $46, or 43% in a scant six months that it has set the cat among the pigeons within the producing countries. The decline has been so precipitous that the budgets of oil producing countries from Saudi Arabia, to Russia, to Norway, have taken a real walloping. What else would you expect when your principal revenue source suddenly halves?
The plunge caught the producers totally by surprise. So to meet budget shortfalls, they are having to raise cash from their sovereign wealth funds. Some 15 of the world?s 20 largest sovereign wealth funds are run by oil producing countries.
To raise money, they are having to sell off investments, primarily stocks, and especially energy stocks. That is one of the few industries they actually understand.
This all means that the selling should dry up going into yearend, once budgetary requirements are met. If the price of oil stabilizes here at $61, or heaven forbid, starts to rise, then their selling of stocks completely ceases.
The bull market returns.
After suffering through a Trade Alert drought that has lasted more than a month, there are finally some nice trades setting up. I?m thinking specifically about the S&P 500 (SPY), energy (OXY), (XOM) and Solar stocks (SCTY), (FSLR), (VSLR), and even a chance to get back into the front-runners, technology (XLK) and biotech (BBH). Europe is also finally starting to look enticing.
Watch this space.
Goldilocks is Still Alive and Well
Just want to let you know that I have had some great trades with you this year. I made the most money on (FXE), with (IWM) in second place. (IBM) was in third place - with one trade from you and comments from Jim Parker.
I've found that when Jim says a stock has hit bottom it's usually a good time to buy, even if he doesn't send out a Trade Alert. You were right when you said we can make more money waiting for a few good trades instead of overtrading.
Most of the money I lost this year was from my own mistakes - overtrading, not stopping out and waiting too long to take profits. My intention was to do only what you said, but the market is very tempting.
After looking back on my trades this year, I'm thinking I should reconsider and sign up for Jim's service again. It doesn't take many trades to pay for the service, even if I can't keep up with it all the time. And I learn a lot from him too.
I expect 2015 to be a great year! Safe travels over the holidays!
Susanna
Orlando, Florida
?I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.? said oracle of Omaha, Warren Buffett.
Global Market Comments
December 10, 2014
Fiat Lux
Featured Trade:
(UPDATE ON LINN ENERGY), (LINE),
(THE MYSTERY OF THE MISSING $100 BILLION), (TLT),
(MY FAVORITE SECRET ECONOMIC INDICATOR)
Linn Energy, LLC (LINE)
iShares 20+ Year Treasury Bond (TLT)
After the catastrophic 25% fall in the units of Linn Energy (LINE) over the past three days, I thought I?d better take another look at the company. The company?s units have now crashed by an eye popping 55% since the May $31 high.
The units have been trading as if the company is imminently going bankrupt. The contradiction is that it clearly isn?t. This is basically a healthy company that is undergoing some volatility typical for the sector.
Is this logical or rational?
No, not at all. But when a real panic hits, you sell first, and ask questions later. That has clearly been happening in the oil patch for the past month.
At the $14 low on Monday, the units were yielding a spectacular 20.7% annualized. This is not some imaginary pie in the sky estimate. This is what the actual $0.24 monthly cash payout announced by the company as recently as December 1 works out to for holders of record as of Thursday, December 11.
Nor are these spectacular yields based on some wild leveraged bets in the financial markets. (LINE) is predominantly a natural gas company, a commodity which has seen its price go largely unchanged for the past two years, hovering above $3.50. And much of its production has already been hedged against any downside risk with offsetting positions in the futures market.
I always try to use every loss as a learning opportunity, or the lesson goes wasted, and is doomed to repetition.
The reasons above were why I shot out a quick Trade Alert last week to buy (LINN) at $16.67. It was an uncharacteristically cautious position for me. But calling bottoms in major trends is always a risky enterprise, so I went small, very small. I bought the underlying units, not the options, and then in unleveraged form.
Initially things went great, rocketing 13% right out the door. Short term, smart traders, like Mad Day Trader Jim Parker, then put in tight stop losses below. That way, he was playing with the house?s money in any further upside, and is assured against loss during any rapid reversal.
I, unfortunately was too slow to do so, and had to bear the cost of the sudden 25% drop. Remember, being right 80% of the time means that I am wrong 20% of the time. But with only a 10% position, my loss never exceeded 1.60% of my total portfolio, something I can live with, and ride out until any recovery.
My guess is that many (LINE) holders violated my ?Sleep at night rule,? lured by the hefty dividend payout into owning too many units.
Once burned, twice forewarned.
My advice to you now is ?Hang on.? You?ve already taken the hit. Don?t bail here and miss the recovery, which will probably begin in earnest next year.
